Hi, new here. Not a physician, but an independent IT consultant who got a link to this forum from the PhysicianOnFire blog (where this question came up) and wondered if there are any here in a similar situation who can answer a tax question.
Bear with me, but as I understand it, at the time I pay myself “reasonable” wages (since I can’t draw all the profit as a distribution), my LLC has to run payroll for me as its single employee, withholding federal and state taxes according to a W-4 declaration, and FICA contributions, and at the end of the tax year issue a W-2 for the totals paid via payroll, that is used for my personal tax return. In this situation, I am an employee of my own LLC.
Employee payroll can happen on any frequency the LLC decides. If I make it monthly, the LLC is already withholding actual income taxes for me on a monthly basis, so presumably that means I (the self-employed person) should file a quarterly estimate of zero to avoid paying twice?
I assume that in this case is the quarterly estimate is only supposed to cover distributions (profit) I make to myself from the LLC that are not classified as W-2 wages? If this is the case these are virtually impossible to estimate, and I would end up filing quarterly estimates of zero in Apr, Jun and Sep, and paying myself a single distribution in Dec, reporting and paying that quarterly estimate in Jan. I don’t see how the IRS gets it’s quarterly payments any quicker unless you actually take distributions (not wages) periodically throughout the year. Am I missing something?
I work short-term contracts with sometimes long periods of "down time" in between, so it's very hard to estimate quarterly taxes. In fact what I plan to do is not take anything out of the LLC until the end of the year (Dec), and at that time run a single annual payroll for a "reasonable" salary and then take whatever is left over (minus a small "float") as a profit "distribution". Is my assumption about zero quarterly taxes in Apr, Jun and Sep correct?
Thanks
Bear with me, but as I understand it, at the time I pay myself “reasonable” wages (since I can’t draw all the profit as a distribution), my LLC has to run payroll for me as its single employee, withholding federal and state taxes according to a W-4 declaration, and FICA contributions, and at the end of the tax year issue a W-2 for the totals paid via payroll, that is used for my personal tax return. In this situation, I am an employee of my own LLC.
Employee payroll can happen on any frequency the LLC decides. If I make it monthly, the LLC is already withholding actual income taxes for me on a monthly basis, so presumably that means I (the self-employed person) should file a quarterly estimate of zero to avoid paying twice?
I assume that in this case is the quarterly estimate is only supposed to cover distributions (profit) I make to myself from the LLC that are not classified as W-2 wages? If this is the case these are virtually impossible to estimate, and I would end up filing quarterly estimates of zero in Apr, Jun and Sep, and paying myself a single distribution in Dec, reporting and paying that quarterly estimate in Jan. I don’t see how the IRS gets it’s quarterly payments any quicker unless you actually take distributions (not wages) periodically throughout the year. Am I missing something?
I work short-term contracts with sometimes long periods of "down time" in between, so it's very hard to estimate quarterly taxes. In fact what I plan to do is not take anything out of the LLC until the end of the year (Dec), and at that time run a single annual payroll for a "reasonable" salary and then take whatever is left over (minus a small "float") as a profit "distribution". Is my assumption about zero quarterly taxes in Apr, Jun and Sep correct?
Thanks
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