Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I own my own business and are the only employee of my business.

My question is, If I...
I own my own business and are the only employee of my business. My question is,

If I fired myself and basically did not run a Payroll anymore, As the employer now, Am I only obligated to pay the taxes on a Potential Profit for my business for the year? Or is there more to it?
Show More
Show Less
Ask Your Own Tax Question
Answered in 9 minutes by:
6/10/2009
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,699
Experience: Taxes, Immigration, Labor Relations
Verified

How is your business organized?

Is that LLC? S-corporation? C-corporation?

Is the business profitable?

Ask Your Own Tax Question
Customer reply replied 8 years ago
It's an LLC

and Yes it turns a profit.

Unless you selected to be treated as S-corporation - a single member LLC is disregard entity (considered a solo proprietorship) for tax purposes - you should not treat yourself as an employee and do not pay yourself wages.

Instead all income should be treated as self-employment income and taxed as such on your individual tax return.

 

If you business is profitable - that is very good in this time - you will pay self-employment and income tax on your net income - regardless if that income was distributed to you for personal purposes or left on your business account.

 

You do not need to run a payroll to pay yourself - that is not needed.

But as a person - you need to estimate your business income and tax liability - and pay estimated taxes quarterly using form 1040ES - http://www.irs.gov/pub/irs-pdf/f1040es.pdf

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
Ok, So just so that we are clear and on the same page..

As the EMPLOYER ( LLC ) ... My only Duty ( tax wise ) is the Estimated Business Income and Tax Liabilty that can be paid Quaterly.

Can that be done yearly? when I file the taxes for my business or is that only done Quarterly?

And as of Tomorrow I could terminate my Employment with myself and not owe any FEDERAL OR STATE EMPLOYEE Taxes after termination from the EMPLOYER ( LLC ) standpoint?

As an owner of LLC - if you did not select the LLC to be treated as S-corporation - you need to verify that with your tax person - you are not considered as an employer.

 

LLC should not pay wages to the owner and should not run payroll - if you do so - that is incorrect - and should be corrected as soon as possible.

 

As an owner of the LLC (not as an employer ) you are responsible to keep a business record and report LLC's business income and expenses on your personal income tax return.

You file your federal tax return annually - normally by April 15 following year.

 

Separate issue - when your tax should be paid - generally the IRS expect taxes to be paid as the income received - there are several ways to pay your tax liability;

-- you may ask the payer to withhold taxes - or if you have a regular job - you may increase withholding to cover your business tax obligations.

-- you may pay estimate tax quarterly - see form 1040ES - http://www.irs.gov/pub/irs-pdf/f1040es.pdf

-- you may pay taxes at the tax time - for 2009 tax year before Apr 15, 2010 - however - if you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will have paid enough tax to avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
wow... So if so be the case that my LLC was not set up to be treated as a S-Corporation is it safe to say that I basically lost all that money paying employer and employee taxes through-out the time I running payroll which is now 2yrs and 5 months.

Is there any way to get a reinburstment from the state if this is the case. Or do I just have to sit and bite my thumb, Cause JESUS that was a good sum of money sent out.

Thanks a lot.

So if so be the case that my LLC was not set up to be treated as a S-Corporation is it safe to say that I basically lost all that money paying employer and employee taxes through-out the time I running payroll which is now 2yrs and 5 months.

 

First of all - it would be incorrect to say that paying employer and employee taxes through payroll - is a loss of the money.

FICA tax are paid 7.65% by an employer and 7.65% by an employee (as withholding) - total 15.3%

self-employment tax is 15.3% paid by the LLC owner - so there is no difference.

 

As part of employment tax you might paid FUTA tax 6.2% of first $7000 of your annual wages - that is $434 - you may consider as overpayment, and

additional overhead for running unnecessary payroll - these you may consider as your loss - no need to bite the thumb...

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
Sorry for the Late Reply LEV...

So once I get confirmation that my LLC was infact not set up to be an S-Corporation I could just go ahead and cancel the Payroll Services I'm currently enlisted in.

And if by any chance my LLC was set up to be an S-Corporation, can this be changed? Or because I am the only member of the LLC does it have to remain that way?

Also even as a S-Corporation, Do I still need to run a Payroll Service? Can I still Terminate my employment and just cover the Estimated Taxes due in that Quarterly breakdown mentioned in Form 1040ES?

Sorry for the questions after questions, It's just never really clear for me the way the TAX system works and I want to make sure that I don't get any surprise notices with BALANCE OWED next to my Name.

So once I get confirmation that my LLC was in fact not set up to be an S-Corporation I could just go ahead and cancel the Payroll Services I'm currently enlisted in.
yes - that is correct - you would not need payroll services as long as you do not have any employees besides yourself.
And if by any chance my LLC was set up to be an S-Corporation, can this be changed? Or because I am the only member of the LLC does it have to remain that way?
A single member LLC (SMLLC) can be either a corporation or a single member "disregarded entity". Again, to be treated by the IRS as a corporation, the SMLLC has to file a Form 8832, Entity Classification Election and elect to be classified as a corporation. An SMLLC that does not elect to be a corporation will be classified by the IRS as a Disregarded Entity which is taxed as a sole proprietor for income taxes. See more details here - http://www.irs.gov/businesses/small/article/0,,id=158625,00.html
Also even as a S-Corporation, Do I still need to run a Payroll Service? Can I still Terminate my employment and just cover the Estimated Taxes due in that Quarterly breakdown mentioned in Form 1040ES?
No for S-corporation - you should have payroll and pay yourself a reasonable wages - and the rest of the profit will be passed to you as an owner as dividends without self-employment tax - that would be an advantage of having S-corporation.

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
ok .. so

LLC not set up as S-Corp = No need for Payroll services but as the Owner of the LLC will need to file 1040ES for estimated taxes quaterly or yearly by april 15th, 2010.

LLC set up as S-Corp = Should run Payroll

I guess my main concern is the following..

Business isn't too good right now and I simply can't afford to pay myself but I still have to pay all these taxes for myself as the employer to the employee ( also myself )..

So because i haven't been able to even cash a check I've written for myself in quite sometime, I guess i'd much rather treat my business as a LLC that was not set up as an S-Corp and just deal w/the estimated taxes for the yr, rather then all the other ones that I pay now because i have an employee

Fed
State
Medicare
Social Security
and so forth..

You have been most helpful Lev and you can be sure that your guidence will be accepted and you will be awarded with an acceptance and payment.
Customer reply replied 8 years ago
I only pay myself 400.00/week but have my Payroll set up to pay me Monthly, so yearly about 15,600.00 a yr after taxes are deducted..... so is it even worth it?

Like i said I i don't even get to cash the checks i write to myself, but still have to pay the taxes owed as the employer on it.

Customer reply replied 8 years ago
I only pay myself 400.00/week but have my Payroll set up to pay me Monthly, so yearly about 15,600.00 a yr after taxes are deducted..... so is it even worth it?

Like i said I i don't even get to cash the checks i write to myself, but still have to pay the taxes owed as the employer on it.







You are correct - if you are the only one working for the business - using payroll service is unnecessary overhead - and should be cut off. You would not need to file employment tax return either.

 

Another saving - would be FUTA tax that you should not pay for yourself.

 

Employment taxes would be equal to self-employment taxes - so there would not be any difference from that point.

 

You need a nice talk with your tax person and plan to eliminate your payroll. You would need to file a final employment tax return - not just stop payroll.

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
Sweet and all this done only if I wasn't set up as a S-Corp?

But if it was I can change it so that I'm not and just do as mentioned above?

Yes - if previously you made S-corporation tax treatment election for your LLC - you may revoke that election.

 

Here is information about requirements and steps you should follow - http://www.1120saccountant.com/revoking-s-status.htm

and you would need to file a final tax return for S-corporation.

 

 

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,699
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 8 years ago
You have been nothing short of EXCELLENT. I will be sure to refer anyone in my lifetime with Tax questions to you.

Thanks a million Lev
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,699
30,699 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Ministers Housing/Self-Employment After form 4361 is
Ministers Housing/Self-Employment After form 4361 is approved by IRS, I need to go back and file form 1040X to amend my return, where I paid self-employment tax.Let's say form SE showed $5,000 in self… read more
Lev
Lev
Tax Advisor
30,699 satisfied customers
Would the estate pay self employment taxes on the income
Richard,Would the estate pay self employment taxes on the income before the beneficiaries are determined? For instance if it takes the court 2 years to say the parents are the beneficiaries. How is th… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,338 satisfied customers
Changing being taxed as an LLC sole proprietor to an LLC
changing being taxed as an LLC sole proprietor to an LLC taxed as an S-corp, do they need to file Form 8832 or Form 2553 or both?If both, in what order?THANKS… read more
abci168
abci168
Principal
27 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis) - I would like to pay my son to help me with the business. The LLC has no employees by design so my son (under 18) would be an ou… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
My withholding exceeds my tax liability for each of the the
My withholding exceeds my tax liability for each of the the first three quarters of 2017. However, in December 2017 I received a taxable gift of $78,000 from which nothing was withheld. I know this mu… read more
abci168
abci168
Principal
27 satisfied customers
I am a sole proprietor operating an LLC in Wyoming providing
Hello, I am a sole proprietor operating an LLC in Wyoming providing business to business services and supplies related to lighting maintenance. I have a customer that is insisting that I supply inform… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
With the new tax laws, if I'm a sole proprietor, would it
With the new tax laws, if I'm a sole proprietor, would it make sense for me to become an LLC? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis). I need to know if I can deduct the finance expense tied to a line of credit for my LLC from income. I generally understand that … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
If you are a sole proprietor llc and contributing to a SEP
If you are a sole proprietor llc and contributing to a SEP should it be contributed from a personal account or business account? I would think personal since on your tax return it is deducted on the 1… read more
abci168
abci168
Principal
27 satisfied customers
Is income from an LLC passed through to personal tax return
Is income from an LLC passed through to personal tax return considered earned income, enabling me to contribute to a traditional IRA?… read more
abci168
abci168
Principal
27 satisfied customers
Personal Estimated Federal Tax/Illinois payment: My federal
Personal Estimated Federal Tax/Illinois payment:My federal and IL taxes deducted on regular basis from pay check as employee. But I have S corp for which I know rough profit at 4th quarter since my ve… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Regarding Federal tax income Form 4952, should I expect my
Regarding Federal tax income Form 4952, should I expect my client to provide me a form to help me fill out line 1 for "investment interest expense paid"? And if so what is the form number?… read more
abci168
abci168
Principal
27 satisfied customers
This is a question on a UK resident's personal income tax on
This is a question on a UK resident's personal income tax on lump withdrawals of funds in a Canadian RRSP using an example with funds expressed in $CAN. Value of lump sum payment from the RRSP is $100… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,804 satisfied customers
I am completing my personal income taxes. For this filing
I am completing my personal income taxes. For this filing year, I left my corporate career to manage my real estate full time. Therefore, the real estate is moving from a passive activity to an active… read more
Lev
Lev
Tax Advisor
30,699 satisfied customers
Business tax question. I am a sole proprietor consultant and
Business tax question. I am a sole proprietor consultant and I travel quite a bit for business. I have been increasingly using uber instead of renting cars and I assume this is a deductible expense. I… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
Lev
Lev
Tax Advisor
30,699 satisfied customers
I am self employed sole proprietor (no employees) and I am
I am self employed sole proprietor (no employees) and I am over 50 years old. I contribute to a Roth IRA for $6500 per year. How much can I additionally contribute to a solo-401K (including employer c… read more
Lev
Lev
Tax Advisor
30,699 satisfied customers
NYS can collect personal income tax for 20 years? But the
Hi - So NYS can collect personal income tax for 20 years? But the Fed can only collect for 10? … read more
abci168
abci168
Principal
27 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x