Page 10 - Payroll

Self-Employed

Payments

& Taxes

OWNER DISTRIBUTIONS

Unless your business is a C-Corp or has
elected S-Corporation tax status with the
IRS, self-employed owners and partners in
a partnership are not allowed to be on
payroll. Instead, they simply pay
themselves via a distribution as net income
and cash flows allow. Owners/partners
should simply write a check to themselves
from the business and code this as a CALCULATION OF ESTIMATED TAXES

distribution in the business's books. They
then deposit this into their personal bank Estimated taxes are based on your prior
account for personal spending, just as they year's tax return in order to avoid penalties
would a paycheck. and interest at the Federal or state level.
For Federal purposes, the estimates must
be equal to:
ESTIMATED TAX PAYMENTS

Because self-employed individuals are not 90% of the tax for the current year; or
on payroll and do not have withholdings 100% of the tax shown on the return for
from their pay as employees do, they are the prior year; or
required to pay in estimated taxes on an 110% of the tax shown on the return for
quarterly basis. These estimated taxes may the prior year for those with AGI greater
seem higher than federal taxes you might than $150,000 (or $75,000 for MFS)
have paid as an employee as they cover
Federal withholding, employee FICA (SS & ESTIMATED TAX DUE DATES
MC taxes) and the employer portion of Estimated taxes are paid quarterly and are
FICA. (As the owner, you are responsible

for remitting both halves of the FICA tax as due on the following dates:
you wear both the employee and
employer hats.) 1st Quarter: April 15th
2nd Quarter: June 15th
3rd Quarter: September 15th
4th Quarter: January 15th (of the
following year)

Page 8 Terri Johnson, CPA