Are payroll taxes deductible for my LLC 941?
I've been running a small consulting LLC for about 3 years now and things are finally picking up to where I hired my first employee last quarter. I filed my Form 941 for employer payroll taxes and paid everything on time, but now I'm wondering - can I deduct these payroll taxes when I file my return? I'm using Schedule C since it's just a single-member LLC. The payroll taxes were around $2,100 for the quarter, which feels like a decent chunk of money, so I'm hoping I can deduct them somewhere. Anyone know if the 941 taxes are deductible and where exactly I would put them on my return? Thanks!
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Keisha Williams
Yes, you can generally deduct the employer portion of payroll taxes on your Schedule C as a business expense. The employer's share of Social Security, Medicare (FICA), and federal and state unemployment taxes are all deductible business expenses. The key distinction is between the employer portion (which you can deduct) versus the employee portion (which you cannot deduct as the employer, since that's technically their money that you're withholding). On your Schedule C, these would typically go on line 23 "Taxes and licenses" - this is where you'd include the employer portion of payroll taxes you paid. Make sure you're only deducting the employer's share though!
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Paolo Rizzo
•Thanks for the info! Quick follow-up question: what about the FUTA tax? Is that considered part of the employer portion? Also, do we need to keep separate documentation for this deduction or is the 941 filing enough?
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Keisha Williams
•FUTA (Federal Unemployment Tax Act) is definitely deductible since it's paid entirely by the employer - employees don't contribute to FUTA at all. It's 100% an employer expense. For documentation, I recommend keeping copies of your filed 941 forms, payment receipts, and any payroll reports that break down the taxes you paid. The 941 alone isn't enough because it doesn't clearly separate which portion is the deductible employer share versus the employee withholdings. Your payroll system should generate reports that show this breakdown clearly.
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Amina Sy
After struggling with similar payroll tax questions for my small business, I found this amazing tool called taxr.ai (https://taxr.ai) that literally transformed how I handle my business taxes. It analyzed my payroll documents and immediately clarified which portions of my 941 taxes were deductible. The best part was that I uploaded my payroll reports and tax forms, and it explained exactly what lines on Schedule C I should use for different expenses. I was mixing up what belonged on "Taxes and licenses" versus other categories before using this. They even have specific guidance for single-member LLCs on how pass-through taxation works with payroll expenses.
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Oliver Fischer
•Does it work with QuickBooks payroll reports too? My accountant retired and I'm doing this myself for the first time this year.
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Natasha Ivanova
•I'm kinda skeptical about these online tax tools. How does it actually verify what's deductible vs just giving generic advice that could be wrong for your specific situation? I got burned by TurboTax before.
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Amina Sy
•It definitely works with QuickBooks reports! You can upload the PDF exports directly and it recognizes the format. I was actually using QuickBooks payroll when I tried it and it analyzed my reports perfectly. For verification, it doesn't just give generic advice - it actually references specific IRS publications and tax code sections that apply to your situation. It's not like TurboTax where it just walks you through questions. You get actual explanations citing official sources, and it points out the specific lines and amounts from your uploaded documents that matter for deductions.
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Oliver Fischer
Just wanted to update that I tried taxr.ai after seeing it mentioned here and it was actually super helpful! I uploaded my QuickBooks payroll summary and my filed 941, and it broke down exactly what parts of my payroll taxes were deductible on Schedule C. It even showed me where my previous calculation was wrong - I was accidentally trying to deduct both the employer AND employee portions of FICA. Saved me from potentially triggering an audit! Now I feel much more confident about my filing.
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NebulaNomad
If you've been trying to call the IRS to get clarity on payroll tax deductions, good luck! I spent TWO WEEKS trying to get through their business tax line. Then I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was specifically confused about how to handle the employer portion of payroll taxes for my LLC compared to my personal income taxes, and the agent was able to walk me through exactly how to properly deduct them on Schedule C. Completely worth it to get an official answer directly from the IRS instead of guessing.
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Javier Garcia
•How does this actually work? The IRS phone system is notorious for hanging up on people. Are you saying this somehow bypasses their system?
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Natasha Ivanova
•Sounds way too good to be true. The IRS doesn't give priority to people using certain services. I'm calling BS on this one. They're probably just charging money to call the same number everyone else does.
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NebulaNomad
•It doesn't bypass the system exactly. They use an automated system that navigates all the phone menus and waits on hold FOR you, then calls you back when an actual human IRS agent is on the line. It's basically like having someone else wait on hold instead of you doing it. I was skeptical too, but it actually works. They don't get you "priority" - they just handle the most frustrating part, which is the endless holding and getting disconnected. I think they use multiple lines at once to increase the chances of getting through, which is something we can't do as individuals. There's no magic priority access - just a smart system that plays by the IRS's rules but optimizes the process.
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Natasha Ivanova
Ok I feel like I need to eat my words. After seeing the explanations about Claimyr, I decided to try it because I was getting nowhere with the IRS for THREE DAYS trying to ask about LLC payroll tax deductions. I was completely shocked when I got a call back with an actual IRS business tax specialist on the line about 25 minutes after signing up. The agent confirmed exactly what to deduct on Schedule C and clarified my confusion about state unemployment taxes too. I still can't believe it worked, but it definitely saved me hours of frustration and helped me get the right answer directly from the source.
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Emma Taylor
Don't forget that if you're a single-member LLC, you shouldn't be paying yourself through payroll anyway - you should be taking owner's draws! The only exception is if you've elected to be taxed as an S-corp. If you're being taxed as a sole proprietor, paying yourself via payroll and filing 941s for yourself can actually cause problems.
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PixelPioneer
•I'm still taxed as a sole proprietor, but I hired my first actual employee (not myself). That's who I'm paying through payroll and filing the 941 for. I'm still taking owner's draws personally. Should have clarified that in my original post!
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Emma Taylor
•That makes perfect sense then! Yes, in that case you absolutely can deduct the employer portion of payroll taxes for your employee on Schedule C. Just make sure you're tracking your owner's draws separately since those aren't deductible expenses. One more tip - if your business continues to grow, you might want to look into S-corp election for next year. Once you're making a reasonable amount of profit, it can sometimes save on self-employment taxes to pay yourself partially as a W-2 employee with a reasonable salary and take the rest as distributions. Might be worth running the numbers with a tax professional when you get a chance.
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Malik Robinson
Has anyone used any particular tax software that handles this 941 deduction well for small business owners? I tried using TurboTax Small Business last year and it was super confusing with my payroll taxes.
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Isabella Silva
•I've had good luck with H&R Block Premium & Business. It has specific sections for entering payroll taxes and breaks everything down by employer vs employee portions. Much clearer than TurboTax in my experience.
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Beth Ford
Great question! I just went through this exact situation with my LLC last year. Yes, the employer portion of your 941 payroll taxes is definitely deductible on Schedule C. Here's what I learned: You can deduct the employer's share of Social Security (6.2%), Medicare (1.45%), FUTA, and any state unemployment taxes you paid. For your $2,100 in quarterly taxes, a good chunk of that should be deductible - just make sure you're only counting the employer portion, not the employee withholdings. I put mine on Line 23 "Taxes and licenses" on Schedule C. One thing that helped me was creating a simple spreadsheet to track the employer vs employee portions each quarter, since the 941 form shows everything together. Your payroll service should be able to give you a breakdown if you don't already have one. Also, don't forget about any state payroll taxes you paid - those are deductible too if they're the employer portion. Just keep good records of all your payroll tax payments and forms in case the IRS ever asks for documentation.
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Amara Nwosu
•This is really helpful advice! I'm curious about the spreadsheet you mentioned for tracking employer vs employee portions - did you create separate columns for each type of tax (Social Security, Medicare, FUTA, etc.) or just one column for total employer portion? I'm trying to set up better record-keeping for next year and want to make sure I'm tracking everything the IRS might want to see if they audit my payroll deductions.
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