Originally Posted by jaarso81
My question is, what would happen if we just wait end of the year and report our total income for the year as Guaranteed payment on our tax return?
UNLESS you live in one of the 9 community pty states , I mean , UNLESS you qualify as qualkfied joint venture, your LLC needs to file Form 1065 and issue Sch K-1s to each partner.So, as you know, as LLC owners/ partners , you NEED to report business income and losses on your personal tax returns of 1040s; in general, you, as LLC members, are considered self-employed business owners UNLESS you are limited partners in LP/LLP with no guaranteed payments) rather than employees of the LLC so you are not subject to tax withholding. Instead, each LLC member is responsible for setting aside enough money to pay taxes on that member's share of the profits. The members must estimate the amount of quarterly estimated tax you'll owe for the year and make quarterly payments to the IRS (and to the appropriate state tax agency, if there is a state income tax) in April, June, September, and January. If you did not pay enough tax throughout the year by making quarterly estimated tax payments, you may have to pay a penalty/interest for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1K (after credit refundable/ nonrefundable) in tax after subtracting their withholding and estimated tax payments, or if they 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
However, in reality, UNLESS taxable income is very high( the amount is I guess relative to each taxpayer), many LLC members NEVER pay quarterly estimated taxes due to low amount of penalties/interest because of lower taxale income; LLC members/partners are not employees so no contributions to the FICA taxes are withheld from your paychecks. Instead, most LLC owners/partners are required to pay self-employment taxes on Sch SE of 1040 directly to the IRS.
NOTE; You do not NEED to pay quarterly 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