Business facts: The LLC I want to open is a pass-through in the State of California. It is with another individual.
Why do I need to pay estimated tax payments every three months if I'm paying it annually with my own personal income?
I've read books about LLC's and they all say that I need to pay business profit taxes with my own personal income annually, so then what's the point of the quarterly?
I don't understand, please explain it to me.
2007-08-09 16:57:38 · 5 answers · asked by Emily 2 in Business & Finance ➔ Taxes ➔ United States
Your state and federal governments don't want to wait until the end of the year to get 12 month's worth of tax dollars from you. For that reason, you must pay quarterly. At the end of the year, you will add up all of the quarterly payments you have made and subtract that from the actual, computed tax you owe. If you have UNDER paid, then you will have to pay the difference and next year your quarterly estimated payment will have to be higher.
Interesting how things aren't as easy on businesses and business owners as most people think, isn't it?
2007-08-09 17:03:20 · answer #1 · answered by cardtapper 6 · 0⤊ 1⤋
Our income tax system is a pay-as-you-go system, and you are required to deposit money through the year to cover the taxes that you will owe. If you were an employee, it would be deducted from each paycheck. Rather than drive themselves and everybody else crazy with paperwork, the IRS just requires people who do NOT have enough withheld to pay in quarterly.
If you don't, you will probably owe penalties at the end of the year for underwithholding, even if you pay all the money you owe when you file your return.
2007-08-10 00:33:31 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
You need to pay quarterly because taxes are due when the income is earned, NOT on April 15th. A wage-earner pays their taxes every payday. The self-employed individual gets a break and only needs to pay quarterly.
2007-08-10 00:00:39 · answer #3 · answered by Bostonian In MO 7 · 5⤊ 0⤋
ITS SO YOU WONT SPEND ALL YOUR MONEY ON YOUR GIRLFRIEND DURING THE YEAR AND NOT HAVE ENOUGH LEFT FOR YOUR UNCLE S. AT TAX TIME.
2007-08-10 00:04:02 · answer #4 · answered by woolly worm 6 · 0⤊ 1⤋
Because they can draw interest is all I can figure.
2007-08-10 00:01:00 · answer #5 · answered by Anonymous · 0⤊ 2⤋