LLC Quarterly Taxes: Everything You Need to Know
LLC quarterly taxes are required by the IRS (Internal Revenue Service) to be paid by any owners or members of Limited Liability Companies (LLCs).4 min read
2. What are the Required Quarterly Taxes?
3. What Taxes Do Self-Employed People Pay?
4. How Do I Make Quarterly Payments?
Who is Required to File Quarterly Taxes?
You may be responsible for filing quarterly taxes if you are self-employed.
Self-employed persons include:
- Independent contractors
- Sole proprietors
- Members of partnerships
- Members or owners of LLCs
- Any business owners (including part-time)
If a self-employed person believes that not enough money is being withheld from their income to cover their taxes, they should pay quarterly taxes.
The amount withheld according to your W-2 can be increased in order to make sure enough income is set aside for taxation.
What are the Required Quarterly Taxes?
If you think you'll exceed $1,000 in owed taxes for the current year once you've subtracted withholdings and credits, and those withholdings and credits are expected to make up less than 90 percent of the return for the current year or 100 percent of the return for the previous year (covering the full year or 12 months), you should make quarterly tax payments for the current year.
Quarterly taxes must be paid by the following due dates:
- First quarter: April 15
- Second quarter: June 15
- Third Quarter: September 15
- Fourth Quarter: January 15
These payment increments follow the "pay as you go" federal tax system.
Federal income taxes, as well as self-employment taxes, should follow this system. If these payments are not made and deadlines are missed, penalties may ensue. Just making the April 15 deadline for your personal tax returns will not suffice when quarterly taxed are owed.
Payroll taxes might require a different set of quarterly payments.
An LLC with employees must withhold the appropriate taxes from the paychecks they send out. The taxes withheld from those checks have to be paid by a certain deadline if they meet a specified amount.
Federal payroll also has a set of returns that have to be paid. Form 941 is a common tax return form that is required to be filed before 30 days after the end of a quarter month. The calendar quarters end on:
- First quarter: April 30
- Second quarter: July 31
- Third Quarter: October 31
- Fourth Quarter: January 31
Owners and members of corporations or LLCs (that have opted to be taxed as corporations) who fulfill any duties or services for the business have to be paid accordingly. So, the owner of an LLC may be required to write themselves a paycheck and follow the quarterly tax requirements for payroll.
What Taxes Do Self-Employed People Pay?
People who are self-employed will likely be required to pay quarterly taxes in addition to filing their annual tax returns.
There are two different categories of quarterly taxes:
- Self-employment taxes
- Social Security taxes
- Medicare taxes
- Income taxes (business profits and other incomes)
During 2017, the tax percentage for that tax year for net profits or incomes as high as $127,200 was 15.3 percent (12.4 percent for Social Security taxes and 2.9 percent for Medicare taxes).
Deduct any expenses from the company's total revenue brought in (check which types of deduction your business might qualify for) to find your taxable income. So, if the business had a gross annual income of $120,000 but $45,000 of that qualified for deductions, the taxable income would be $75,000.
Small business owners should check the IRS website for guides and more information about the taxes they'll be held responsible for.
Form 1040-ES provided by the IRS will help business owners work through the calculations for finding taxable income and quarterly payments required. Start by finding the company's taxable income, applying the appropriate percentages, and figuring out the total taxes due for the year. Then, divide by four to find your quarterly taxes due on each of the four due dates.
Keep in mind throughout the year that any big changes in revenue or expenses with your company might change the taxes required.
So, you'll want to be sure to reassess if an important client is lost and therefore income changes. You don't want to be paying higher quarterly taxes than is actually necessary.
If the company gains a new, high-paying customer and this increases revenues, you'll want to make sure you're not skimping on quarterly payments, which could cause major issues down the road.
How Do I Make Quarterly Payments?
All quarterly tax payments should be submitted online using the Electronic Federal Tax Payment System or by using the appropriate forms obtained through the IRS.
If you need help with LLC quarterly taxes, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.