Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 05-25-2015, 04:42 PM
Junior Member
 
Join Date: May 2015
Posts: 2
Estimated taxes for mid-year self employment first timer

Hello,

I left my consulting job in April 2015 to start my own consulting business. I am registered as an LLC, with S-Corp status filed through Form 2553.

I will be running a monthly payroll to cover my reasonable salary and taking the rest, minus expenses, as S-Corp distributions when tax time comes around.

I should be receiving my first income from my business during the first couple weeks of June. I will run payroll at that time and filing Form 941 by the due date, while paying the withholdings (Fed/FICA/SS) through EFTPS, and my state taxes through the state system.

With all of that said, should I also start paying the quarterly taxes, starting June 15, to meet and/or exceed the 110% of safe harbor tax payments, relative to last year's tax amount and my salary from last year?

I just want to make sure I stay out of penalty regarding paying enough taxes up-front, even considering I am running payroll for myself. I expect my income to exceed last year's income and understand that one way to avoid a penalty is to ensure you pay 110% or 100% of your taxes from the previous year, depending on your income from that year.

I understand that by paying the estimated taxes, in addition to my payroll taxes, I am paying more than technically necessary to meet the safe-habor tax payments before April 15, but in the end I'm pretty sure I'll actually owe more because of the S-Corp distributions.

I'd just rather pay more than pay a penalty later.

Thank you!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 05-26-2015, 10:13 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,224
I will be running a monthly payroll to cover my reasonable salary and taking the rest, minus expenses, as S-Corp distributions when tax time comes around. =======>Correct; UNLESS the biz takes losses, you need to issue yourself an W2 and need to report the S c orp biz ordinary income reported on Sch K1 on your 1040.

I should be receiving my first income from my business during the first couple weeks of June. I will run payroll at that time and filing Form 941 by the due date, while paying the withholdings (Fed/FICA/SS) through EFTPS, and my state taxes through the state system.======.Correct; most of the time, your S corp does not pay federal income taxes unless it has Built-In Gains Tax/LIFO Recapture Tax/Excessive Passive Income Tax and Penalty. The essential feature of an S corp is that you, as an EE/ shareholder, pay the taxes on income, not the corp. uNLESS your home state is NYS, S corp does not pay state income tax either.

With all of that said, should I also start paying the quarterly taxes, starting June 15, to meet and/or exceed the 110% of safe harbor tax payments, relative to last year's tax amount and my salary from last year?=======>>mostly No unless your s corp has

The tax on built-in gains; The excess net passive income tax and The investment recapture tax.; but as you said you need to submit 941 to IRS quarterly basis and need to deposit employment tax either monthly or semi weekly on most cases, depending on employment tax amount. New S corp owners/ shaeholders can often get confused about both why and how one should pay the taxes associated with the income an S corp generates. There are rare circumstances, however, when S-Corps do have to pay. An S Corporation must make installment payments of estimated tax if the total of the following taxes is $500 or more:


I just want to make sure I stay out of penalty regarding paying enough taxes up-front, even considering I am running payroll for myself. I expect my income to exceed last year's income and understand that one way to avoid a penalty is to ensure you pay 110% or 100% of your taxes from the previous year, depending on your income from that year.========> As said above no your S c orp does not need to pay quarterly estimated taxes to IRS/ your home state.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 05-26-2015, 10:24 AM
Junior Member
 
Join Date: May 2015
Posts: 2
Thank you for the reply, but I am a little confused.

You stated "An S Corporation must make installment payments of estimated tax if the total of the following taxes is $500 or more:".

You did not state which were the following taxes. Additionally, it seems easier for me to send quarterly taxes under my SSN, based on my last year tax burden and income, to ensure I meet the 110% threshold, because all of the income will be ultimately filed on my 1040.

There will be enough non-paycheck income, as SCorp dividends, to be over $500 in additional taxes. Wouldn't me paying 110% of last years federal tax cover me as far as penalties go and be a mathematically easier time?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 05-26-2015, 05:08 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,224
[quote=chris2015;22938]QUOTE]

You stated "An S Corporation must make installment payments of estimated tax if the total of the following taxes is $500 or more:". =========>>Sorry I accidentally omitted the taxes . You, as an S corp owner/EE/ SH, need to make quarterly estimated tax payments if you expect to have more than $1K in tax liability in any year that is not covered by withholding if you will have a large profit from the S corp, then in this case, as you said, you need to pay in estimated taxes each quarter for yourself on form 1040ES. Bu in reality, unless your tax liability is so huge, many do not make quarterly estimated taxes due to lower amount of penalty/interest .
Corect what I mean is that as said your S corp generally does not pay income tax, and so does not have to make quarterly estimated tax payments. There can be exceptions for special circumstances i..e, gain from BIG / passive activity income; for example, if your S corp realizes built-in gains stemming from the period the corp operated as a C corp, then yes. The ;built-in gain tax may be levied.

With respect to other taxes, such as property, sales, and payroll taxes, your S corp is treated the same as any other business and needs to make payments periodically as said previously. You must withhold and deposit income and FICA taxes from your wages, and must pay the employer's share of FICA tax as well. These payments may be required to be made more often than quarterly( mostly monthly/semi weekly).

You did not state which were the following taxes. Additionally, it seems easier for me to send quarterly taxes under my SSN, based on my last year tax burden and income, to ensure I meet the 110% threshold, because all of the income will be ultimately filed on my 1040.=======>>As mentioned above; as a shareholder/owner/EE of your S corp, aslongas you expect to owe $1K or more in taxes( I mean after credits/other withheld taxes from your paychecks) when you file your income tax return, you most likely will need to make estimated tax payments to the IRS and potentially your home state too. There’s one exception: if your witholdings and tax credits add up to as least as much as your prior year’s tax, you do not need to made a federal estimated tax payment.however, you do not have to pay estimated tax for the current year if you had no tax liability for the prior year; You were a U.S. citizen or resident for the whole year;Your prior tax year covered a 12 month period. Generally, you will avoid this penalty if you paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. Aslongas your AGI higher then you need to pay higher percentage of estimated taxes, 110%.if your agi on 1040 line 37 on your tax return is over $150K /$75K if you're MFS, then, your income tax withholding will be at least 110 % of the tax you owed in tax for the previous year.

There will be enough non-paycheck income, as SCorp dividends, to be over $500 in additional taxes. Wouldn't me paying 110% of last years federal tax cover me as far as penalties go and be a mathematically easier time?===========>>I guess so as said above.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Self Employment Taxes Aspen9184 Estimated Taxes 2 03-23-2015 04:19 AM
How do you figure self employment taxes and charitable donations? de3ik Sole-Proprietorship 5 12-02-2012 05:25 PM
What to do if I haven't filed any estimated taxes and tax return for last year yet? MndD C-Corporation 2 06-27-2011 01:15 PM
Are Gambling Winning Subject to Self Employment taxes? Tanya Miscellaneous 1 12-03-2007 10:10 AM
Can you suggest year end strategies for reducing year end self employment income? awkan Sole-Proprietorship 1 02-08-2007 11:59 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning