Do LLCs Pay Quarterly Taxes?

In recent years, limited liability companies (LLCs) have become the preferred structure of most entrepreneurs hoping to incorporate their business. 

LLCs are recognized for their robust liability protections and pass-through tax status. However, even with the favorable tax treatment LLCs enjoy, they still have certain tax obligations.

In this blog, we’ll answer one of the most frequently asked questions about LLCs: do LLCs pay quarterly estimated taxes? We’ll also explore the penalties for not paying your quarterly taxes.

Read on to learn how you can keep your LLC tax-compliant. 

What Are Quarterly Estimated Taxes?

Quarterly estimated taxes are payments made for different types of taxable income not subject to withholding tax, such as income from interest, dividends, alimony, rent, gains, etc. These payments also apply to self-employment income or income earned as a small business owner. 

There are two different categories of quarterly taxes: self-employment and income taxes. 

Self-employment taxes are made up of Medicare and Social Security taxes. 

As of writing, the self-employment tax rate is 15.3%, with 12.4% for Social Security and 2.9% for Medicare. Meanwhile, income taxes are calculated based on the filer’s quarterly taxable income. This includes any deductions or credits they may be eligible for.

Do LLCs Pay Quarterly Taxes?

Technically speaking, no, LLCs don’t have to pay quarterly taxes. As mentioned earlier, LLCs are pass-through entities. Everything they earn and lose flows straight to their owners, who must report the company’s income as their own. 

Employers typically withhold taxes from their employees’ paychecks using the W-4 Form. However, since LLC owners are self-employed, they must independently calculate, file, and pay their estimated taxes.

Single-member LLCs are treated as sole proprietorships by default. So, if your business is classified as a single-member LLC, you must complete a Schedule C form and file it alongside your individual tax return or Form 1040. 

But if you’re one of the owners of a multi-member LLC, the process is a little bit more complicated. 

The IRS considers multi-member LLCs as partnerships, meaning owners must use Form 1065 to file quarterly taxes. Aside from this, members will also have to fill out a Schedule K-1, which reports each member’s share of income, credits, and distributions. 

Knowing how to file quarterly taxes as an LLC owner is the key to staying tax-compliant. 

When are LLC Quarterly Taxes Due For 2024?

The deadlines for quarterly tax payments this year are as follows:

• 1st Quarterly Estimated Tax Payment: April 15, 2024
• 2nd Quarterly Estimated Tax Payment: June 17, 2024
• 3rd Quarterly Estimated Tax Payment: September 16, 2024
• 4th Quarterly Estimated Tax Payment: January 15, 2025

How to Calculate Your Quarterly Taxes

You can use several tools to calculate your estimated quarterly taxes, like the Form 1040-ES. But here’s a simple process you can follow to determine your taxes owed:

Figure Out Your Adjusted Gross Income (AGI)

First, you must determine your estimated adjusted gross income (AGI). Your AGI is your total income minus your deductions and tax credits. It’s the figure that the IRS typically uses to identify your income tax liability. Once you determine your AGI, you need to calculate your estimated taxes.

Calculate Your Estimated Taxes

As mentioned earlier, quarterly taxes for LLC owners consist of self-employment and income taxes. 

You can calculate your income tax by multiplying your AGI by your tax rate. Tax rates are based on your state’s income tax bracket, which changes yearly, so you must check your correct rate before calculating.

Meanwhile, self-employment taxes are calculated by multiplying your estimated total income by 92.35% to determine your taxable income. Then, multiply the result by 15.3% to calculate your self-employment taxes.

Determine Your Quarterly Payments 

Now that you know how much your self-employment and income taxes are, you have to combine them and divide them into four quarterly payments. If your AGI was calculated based on your quarterly income, you can skip dividing your estimated taxes. 

What’s The Penalty For Not Filing Quarterly Taxes?

Missing your LLC quarterly tax deadlines could lead to hefty fines. The penalty for failure to file is 5%, while the failure to pay penalty is 0.5%. Both penalties will be charged for a full month, even if you paid your balance before the month ends. 

Should both penalties be applied simultaneously, the failure to file penalty will be decreased by the amount of the failure to pay penalty. This way, the IRS will charge you a combined penalty of 5%. 

If you want to avoid these penalties, you must ensure that you file and pay your taxes on time. 

Penalties For Underpayment

Underpayment is a very common phenomenon for taxpayers. So, to help filers like you avoid tax errors, the IRS recommends that those with an AGI of $150,000 or below pay 100% of last year’s taxes to avoid penalties. Meanwhile, those with an AGI above $150,000 should pay 110% of their tax returns for the previous year. 

What happens if you underpay your quarterly taxes? The IRS will charge you a penalty based on their calculations.

If you fail to pay the right amount of taxes owed, the IRS will determine the difference between what you owe and what you paid. They will then multiply the difference by the interest rate published for that quarter. 

Get Help For Your Quarterly Tax Filings

Calculating and filing your LLC quarterly taxes can be challenging, especially when you’re also managing the day-to-day operations of your business. It requires a thorough understanding of tax laws and meticulous record-keeping to estimate your quarterly taxes accurately. 

It would be best to get the help of tax professionals like NCH’s team. NCH is a business formation service provider in Nevada that offers tax preparation services to hard-working entrepreneurs like you. 

Our team of tax preparers will help you calculate your estimated taxes and guide you through filing them on time. With our help, you can enjoy a stress-free tax season. x

To learn more about our services, visit our website here or call us at 1-800-508-1729 to schedule a consultation.

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.