Do I need to pay quarterly 1040 ES and 941 (payroll)?
Don't overthink it. As an employee, whether of your own corporation or of someone else, you get a salary and there are deductions taken out. As the owner of a business you get (hopefully) business profits as well. And, in general, you often have other sources of income from investments, etc. Your estimated tax payments are based on the difference between what was withheld from your salary and what you will owe, based on salary, business income, and other sources. So, in essence, you just add up all the income you expect, estimate what the tax bill will be, and subtract what's been withheld. That's your estimated tax payment. I'm not sure why you're confusing the two unrelated things. 1040ES is your estimated tax payments. 941 is your corporation's payroll tax report. They have nothing to do with each other. You being the corporation's employee is accidental, and can only help you to avoid 1040ES and use the W2 withholding instead - like any other employee. From the IRS standpoint you're not running a LLC - you're running a corporation, and you're that corporation's employee. While technically you're self-employed, from tax perspective - you're not (to the extent of your corporate salary, at least). I think I may have figured this out but if someone could double check my reasoning I'd appreciate it. So if my company makes $75000 and I decide to pay myself a $30000 salary, then the quarterly payment break down would be like this: 1040ES: Would pay income tax on non salary dividend ($45000) 941: Would pay income tax, SS, medicare on salary ($30000) (I'm the only person on payroll) So I think this answers my question in that after switching from filing as LLC to S-corp, I won't have to pay as much on 1040ES because some of it will now be covered on payroll.
You are right that even if you do not receive a 1099-MISC, you still need to report all income to the IRS.  Report the $40 on Schedule C or Schedule C-EZ.  Since your net profit was less than $400, you do not need to file Schedule SE.  From the IRS web site: Self-Employment Income It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income. All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040. Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income. Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer. "Your question does not say this explicitly, but I assume that you were once a W-2 employee.  Each paycheck a certain amount was withheld from your check to pay income, social security, and medicare taxes.  Just because you did not receive that amount of money earned does not mean it was immediately sent to the IRS.  While I am not all that savvy on payroll procedures, I recall an article that indicated some companies only send in withheld taxes every quarter, much like you are doing now.  They get a short term interest free loan.  For example taxes withheld by a w-2 employee in the later months of the year may not be provided to the IRS until 15 January of the next year.   You are correct in assuming that if you make 100K as a W-2 you will probably pay less in taxes than someone who is 100K self employed with 5K in expenses.  However there are many factors.  Provided you properly fill out a 1040ES, and pay the correct amount of quarterly payments, you will almost never owe taxes.  In fact my experience has been the forms will probably allow you to receive a refund.  Tax laws can change and one thing the form did not include last year was the .9% Medicare surcharge for high income earners catching some by surprise.    As far as what you pay into is indicative of the games the politicians play.  It all just goes into a big old bucket of money, and more is spent by congress than what is in the bucket.  The notion of a ""social security lockbox"" is pure politics/fantasy as well as the notion of medicare and social security taxes.  The latter were created to make the actual income tax rate more palatable.     I'd recommend getting your taxes done as early as possible come 1 January 2017.  While you may not have all the needed info, you could firm up an estimate by 15 Jan and modify the amount for your last estimated payment.  Complete the taxes when all stuff comes in and even if you owe an amount you have time to save for anything additional.  Keep in mind, between 1 Jan 17 and 15 Apr 17 you will earn and presumably save money to use towards taxes.  You can always ""rob"" from that money to pay any owed tax for 2016 and make it up later. All that is to say you will be golden because you are showing concern and planning.  When you hear horror stories of IRS dealings it is most often that people spent the money that should have been sent to the IRS." "This is a supplement to the additional answers.   One way to generate ""passive"" income is by taking advantage of high interest checking / saving accounts.  If you need to have a sum of liquid cash readily available at all times, you might as well earn the most interest you can while doing so.  I'm not on any bank's payroll, so a Google search can yield a lot on this topic and help you decide what's in your best interest (pun intended).     More amazingly, some banks will reward you straight in cash for simply using their accounts, barring some criteria.  There's one promotion I've been taking advantage of which provides me $20/month flat, irrespective of my account balance.  Again, I am not on anyone's payroll, but a Google search can be helpful here.  I'd call these passive, as once you meet the promotion criteria, you don't need to do anything else but wait for your money.   Of course, none of this will be enough to live off of, but any extra amount with minimal to zero time investment seems to be a good deal.   (if people do want links for the claims I make, I will put these up.  I just do not want to advertise directly for any banks or companies.)" (1) Should I register for VAT?  – If it is below the threshold amount it is purely voluntary. If you register for VAT, you would have to charge VAT and then do returns every quarter. If you can take up this bit of hassle, it doesn't make much of a difference. One thing you need to consider: you get 1% discount during your first year of registering for VAT. If you want to save this discount for when you really need to pay VAT, it could be helpful. (2) What benefits would registering for VAT include?  – Except for reclaiming VAT, where you pay VAT for business expenses, not much. (3) Would I not just hold onto the monies for HMRC ?  – You wouldn't hold any money for HMRC. They will send you notifications if you do not file your returns and pay your VAT quarterly. And get everything cleared from your accountant. If your accountant doesn't answer properly, make it clear you need proper answers. Else change your accountant. If you do something wrong and HMRC gets after you, you would be held liable – your accountant can take the slip if you signed on all business documents provided by your accountant. Yes, you can do this.  I do this for my own single-member LLC, but I usually do it online instead of writing a check. Your only legal obligation is to pay quarterly estimated tax payments to the IRS. I'm assuming you are not otherwise doing anything shady. For example, that you have funds in your business account to pay any expenses that will be due soon or that you are trying to somehow pull a fast one on someone else... I'm also self employed. Your circumstances may be different, but my accountant told me there was no reason to pay more than 100% of last years' taxes. (Even if this years' earnings are higher.) So I divide last year by 4 and make the quarterlies. As an aside, I accidentally underpaid last year (mis-estimated), and the penalty was much smaller than I expected. "You don't actually have to make four equal payments on US federal taxes; you can pay different amounts each quarter.  To avoid penalties, you must have paid ""enough"" at the end of each quarter.  If you pay too much in an early quarter, the surplus counts towards the amount due in later quarters.  If you have paid too little as of the end of a quarter, that deficit counts against you for interest and penalties until it is made up in later quarters (or at year-end settlement). How much is ""enough""?  There are a number of ways of figuring it.  You can see the list of exceptions to the penalty in the IRS documentation.  Using unequal payments may require more complicated calculation methods to avoid or reduce penalties at year-end.  If you have the stomach for it, you may want to study the Annualized Income Installment Method to see how uneven income might affect the penalty." "You report it when the expense was incurred/accrued. Which is, in your case, 2014. There's no such thing as ""accounts payable"" on tax forms, it is an account on balance sheet, but most likely it is irrelevant for you since your LLC is probably cash-based. The reimbursement is a red-herring, what matters is when you paid the money."