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Everything You Need to Know About Tax for SMLLCs
A single-member limited liability company (SMLLC) pays taxes just like every other individual taxpayer according to the individual income tax rates published by the Internal Revenue Service. The current tax rates range from 10% to 37%. Here are the tax rates that will apply when filing your 2021 tax return by the April 2022 tax deadline:
SMLLC tax return
An SMLLC owned by an individual (i.e., not owned by a corporation or a partnership) files its tax return on Form 1040, Schedule C. An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self-employment in the same manner as a sole proprietorship.
If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner’s federal tax return as a division of the corporation or partnership.
Deadline to pay your estimated taxes
For estimated tax purposes, your tax year is divided into four payments periods:
- 1st Payment Deadline: April 15th – Covers income earned from January 1 to March 31
- 2nd Payment Deadline: June 15th – Covers income earned from April 1 to May 31
- 3rd Payment Deadline: September 15th – Covers income earned from June 1 to August 31
- 4th Payment Deadline: January 15th – Covers income earned from September 1 to December 31
NOTE: If the payment deadline falls on a weekend or legal holiday (i.e. Martin Luther King, Jr. Day in January and Washington D.C.’s Emancipation Day in April), you may wait until the following business day to mail or submit your payment.
Does a single-member LLC need to pay quarterly taxes?
A single-member LLC (SMLLC) is generally required to make estimated tax payments, as taxes must be paid as you earn or receive income throughout the year, either through withholding or estimated tax payments. Estimated tax payments are used to pay not only income tax but also other taxes such as self-employment tax and alternative minimum tax.
How to calculate your estimated taxes
Here are some suggestions for figuring out how much your estimated tax should be.
- A good starting point is to use your income, deductions, and credits on your prior-year tax return.
- Next, estimate your expected adjusted gross income, taxable income, taxes, deductions, and credit for the entire tax year.
- Use the worksheet provided by the IRS in the instructions to Form 1040-ES or call our office for assistance.
If you subsequently discover that your estimate was too high, simply complete another Form 1040-ES worksheet to recalculate your estimated tax when it comes time for your next payment. If your estimate was too low, complete another Form 1040-ES worksheet to adjust your next payment.
EXAMPLE: You’re a single taxpayer who has a taxable income of $75,000 that you’ll report on your 2021 individual tax return.
Here’s how to calculate the income tax you’ll owe:
- Locate the appropriate tax table for single taxpayers.
- Your income of $75,000 falls on the third line of the table, which states to multiply the amount of your income that exceeds $40,525 by 22%, then add $4,664.00.
- Step one: ($75,000-$40,525) = $34,475 x 22% = $7,584.50
- Step two: $7,584.50 + $4,664.00 = $12,248.50 Your total tax income tax liability is $12,248.50.
But wait, there’s more…
How to pay your estimated taxes
You can send estimated tax payments with Form 1040-ES by mail, or you can pay online, by phone, or from your mobile device using the IRS2Go app. You can pay your estimated taxes weekly, bi-weekly, monthly, etc. as long as you’ve paid enough in by the end of the quarter.
Avoid paying a penalty!
If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty and/or interest. You may also be charged with a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.
TAX TABLES
Here are the tax rates if you are single
Tax rates if you're a single parent
Here are the tax rates if you are married