How do I figure if I owe Estimated Taxes?

Question

I'm just starting a small business and am running it as a single member LLC. I know it will be taxed as a sole proprietorship. I'm just wondering what I need to do in order to figure if I should pay quarterly estimated taxes or if I can just wait until the end of the year. Is there a penalty for not paying estimated taxes as long as you can pay the whole amount at the end of the year? Any info or suggestions would be great.

Answer 1

There is a penalty. Look on form 2210. It shows how that is calculated. Try that out with your projected income and see what the numbers look like and under what circumstances that penalty can be reduced or waived.

If you are not sure what your income from that business will be you can delay till toward the end of the year. At that point look at your income and send in a payment for estimated taxes. If the payment covers all but about $1000 of the taxes due then you can avoid most of the penalty. With a year's worth of revenue and experience you will know the answer to the "should I estimate?" question for the next years.

Answer 2

The real answer is a little more complicated than any of the answers so far indicate. There are two factors involved. The first is Did you pay taxes last year? I don't mean did you get a refund or pay more, I mean, did you have any tax liability. If you didn't get all of your withholding back, you paid tax. The second is If you make a profit with your new small business you must have paid in estimated taxes of at least 90% of the taxes owed for the current year or 100% of your actual tax liability from the previous year, whichever is less. If you think you will be profitable I'd go with last years number to be sure you are covered. (take that amount and divide it by 4, then pay that much each quarter beginning with April 17th)

Answer 3

If you expect your tax liability to be in excess of $1,000, then you should be making quarterly estimated tax payments. You can mail them in or pay online. If you pay in everything at the end of the year you will be subject to underpayment penalties. You can read more about the topic at:

http://www.irs.gov/businesses/small/article/0,,id=110413,00.html

Answer 4

you have to pay in quarterly at least 75% of taxes owing or the amount you owed last year which ever is less. and yes there is a penalty for not doing so.

Answer 5

At the end of each quarter, consider whether your profits would subject you to income tax if that were your total take for the year. If so, compute the estimated tax and send it to the IRS.

Answer 6

nonetheless no longer adequate counsel to declare properly. submitting MFS is often the worst achievable submitting status. Your entire tax legal duty could be a minimum of $eleven,011 in case you are able to take the usually occurring deduction. even if in the adventure that your considerable different itemizes and you haven't any longer have been given any itemized deductions your self, you need to use a usually occurring deduction of $0 and that would enhance your tax legal duty approximately yet another $a million,425 or so. undecided the type you "broke even" with $4,3 hundred final twelve months as your tax legal duty on $32k could have been a minimum of $6,762 and doubtless extra. in case you have purely paid in $3,000 so some distance you may desire to capture up rapidly to a minimum of your 2009 tax legal duty to circumvent underpayment effects and to $eleven,011 or extra to interrupt even at submitting time this twelve months.