Quarterly LLC Payments

[Alex T.]

I have an LLC that was started in 2017 for my first flip. The LLC generated no taxable income in 2017, but of course, we still filed a return. We sold the flip property in 2018 for a profit. Was I supposed to be paying quarterly taxes to the IRS from the time I made a profit in 2018? My CPA never mentioned anything. I read that you don't have to start paying quarterly until the year following your first filing that has a taxable income...so for me, that would be starting in 2019. Can anyone confirm this? Thanks for the help.

[Ashish Acharya]

Originally posted by @Alex T.:

@Ashish Acharya Thanks for the response. So I have 4 members in the LLC (wife included), but I am the only managing member. Two of the members (including myself) are self-employed without a W2. So in 2017, we filed taxes showing that the LLC didn't make any money. In 2018, the LLC netted 100k. Everyone will get their K1s and file their share of the profit by 4/15/19. In 2019, let's assume the LLC has one flip that closes around June 2019 and the LLC nets another 100k. Would myself and the other non-W2 LLC member need to calculate our tax liability based on our share of the 100k profit and then pay the IRS 50% of our liability in Q3 and Q4? Is that how it should work?

 No, that is not how it works. 

You will be fine if you do this:

• 2018 estimated payment - none as discussed above as you had no tax in 2017
• 2019 estimated payment- Pay 1/4 of 2018 tax you will owe in your 2018 Tax return. Let's say your share of income was 25k ( 1/4 of 100k in 2018) and your tax liability was 2000. You would make 500 each Q in 2019 to IRS regardless of how much you make in 2019. You can pay more if you want but if you make at least 100% of what you paid in 2018 in 4 equal payment, there is no interest and penalty. 

As mentioned above, you make payments two ways:

1) 100% of PY in 4 equal payments ( I am suggesting this) 

2) 90% of CY in 4 equal payments.  ( this is harder for Flips as you dont know how much you might make in CY. There is another method called annualization, but dont have to do all this if you can do #1)