What forming a company changes
Federally an LLC is not a tax classification at all, and a single-member LLC is taxed exactly as its owner was the day before it existed.
Category
Tax and
records.
When you work for yourself, no one withholds tax for you. That change causes most of the surprises covered here, but the deadlines are published and predictable.
The change that causes the rest
Employees have tax taken from each paycheck before the money reaches them. When you work for yourself, the full payment arrives first and the tax bill comes later, often as a much larger lump sum.
That is the mechanical reason a first tax bill in business is so often described as a shock. It is not usually that the rate was unexpected. It is that the timing was, and that a year of not setting anything aside cannot be undone in April.
Everything here is on a published schedule
Most of these rules are clear and publicly available. Payment dates are fixed. Record-retention periods depend on the type of record, not the type of business. The IRS also publishes the factors it uses to decide whether a worker is an employee, while warning that no single factor settles the question.
What is not published is the part that matters most to any individual: how much. That depends on figures that change every year, and on facts about one business. So the pages below give the mechanism and the dates and send you to the agency page for the numbers that move, which is also why there is no dollar figure anywhere here that is not dated in the text.
Records are the cheapest thing on this list
Retention is the item people treat as optional and it is the one that costs least to get right. The periods are fixed, they are short enough to be practical, and the consequence of having kept something is never worse than the consequence of not having it. A reader who does nothing else in this category except keep returns and the records behind them for the stated period has removed most of the downside available here.
One common mistake is counting from the date on the record. For many records, the clock starts with the return they support. For employment taxes, it starts when the tax was due or paid, whichever came later. Filing by the receipt date can lead you to destroy a record too soon.
The 4 pages in tax and records
Estimated quarterly tax
Nobody withholds tax for you, the bill arrives four times a year, and the penalty applies even in a year you are owed a refund.
How long to keep records
The answer may be three, four, six, or seven years, or forever. The IRS gives a different period for each kind of record.
Employee or contractor
The three things the IRS actually looks at, its own warning that no single factor decides it, and the form that gets you a ruling.
Shorter answers
- When is estimated tax actually due?
- Four payments, and the periods are not equal quarters: income from 1 January through 31 March is due 15 April; 1 April through 31 May is due 15 June; 1 June through 31 August is due 15 September; and 1 September through 31 December is due 15 January of the following year. Estimated quarterly tax.
- Can I still be penalised if I am getting a refund?
- Yes. The IRS states it plainly: “If you don’t pay enough tax by the due date of each payment period, you may be charged a penalty even if you’re due a refund when you file your income tax return.” The penalty is about the timing, not the total.
- How long do I keep receipts and returns?
- Three years covers the ordinary case. Six if you under-report income by more than 25% of the gross income shown on the return, seven for a worthless-securities or bad-debt claim, and indefinitely if a return was never filed or was fraudulent. How long to keep records.
- And payroll records?
- At least four years after the tax becomes due or is paid, whichever is later. The clock starts from the tax date, not the date on the record.
- Is self-employment tax the same as income tax?
- No, and meeting it as a surprise is common. It is 15.3%, 12.4% Social Security plus 2.9% Medicare, computed separately on Schedule SE, starting at $400 of net self-employment earnings, regardless of age and regardless of whether you already draw Social Security.
- Does an LLC pay less tax than a sole proprietor?
- Federally there is no such thing as LLC tax treatment. A single-member LLC is disregarded by default and a multi-member one is a partnership, unless Form 8832 elects otherwise, and that election has a filing window. What forming a company changes.
- Someone helps out a few hours a week. Employee or contractor?
- The IRS looks at behavioural control, financial control and the type of relationship, and warns that there is “no ‘magic’ or set number of factors” that decides it. Form SS-8 gets you a ruling, and takes at least six months. Employee or contractor.
- Why are there no current-year figures on these pages?
- Because they go stale silently. Contribution limits, the Social Security wage cap, mileage rates and filing thresholds all reset annually, and a stale number on a tax page is worse than no number. Every figure printed here is dated in the text.
Next: getting found.
What moves local visibility, what cannot be moved at all, and the rules around asking for reviews.
Getting found