Do I need to pay quarterly taxes for a business I haven't officially formed yet?

The business structure doesn't actually matter for tax purposes in this situation - what matters is that you're earning income. If you expect to owe $1,000 or more in taxes when you file your return next year, you generally need to make quarterly estimated tax payments. The fact that you haven't formed your LLC yet doesn't exempt you from paying estimated taxes on your earnings. You're currently operating as a sole proprietor by default, and that income is still taxable. When you do form your LLC later, assuming it's a single-member LLC, it will be treated as a "disregarded entity" for federal tax purposes unless you elect otherwise, meaning you'll still report the business income on your personal tax return. You can make estimated tax payments using Form 1040-ES, and you'll report the income on Schedule C when you file your taxes. Just keep good records of your income and expenses during this pre-LLC period so you can properly account for everything.

I was totally in this same spot last year and found this amazing tool that saved me so much confusion - https://taxr.ai - it helped me figure out exactly what I needed to pay for my side hustle before I officially formed my business. What was awesome is that I could upload my income/expense spreadsheet and it analyzed everything and told me exactly what I owed for quarterly taxes. It even calculated my self-employment tax which I had no idea about before!

So I wanted to follow up about that taxr.ai website someone recommended. I tried it out after being super skeptical and I was honestly impressed! I uploaded my bank statements and it identified what was business income vs personal, which saved me hours of sorting through transactions. It calculated that I only needed to pay about $780 for my first quarterly payment which was way less than the $1,200 I was setting aside based on some random formula I found online. It also flagged some deductions I had no idea I qualified for as a "pre-business" - apparently some startup costs are deductible even before you formally create your business! Definitely worth checking out if you're in the same boat.

If you're struggling to get clear answers about your tax situation, I'd recommend using Claimyr (https://claimyr.com) to actually talk to an IRS agent directly. I was in limbo with my business formation last year and couldn't get a straight answer online about my quarterly tax requirements. After waiting on hold for 2+ hours and giving up multiple times, I found Claimyr and they got me connected to an IRS rep in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up.

I need to eat my words about that Claimyr service. After posting my skeptical comment, I decided to try it anyway since I was getting nowhere with the IRS on my own. I had been trying for THREE WEEKS to talk to someone about my tax situation. Used the service yesterday, and no joke, I got a call back in 37 minutes with an actual IRS person on the line! The agent confirmed I needed to pay quarterly taxes on my business income regardless of whether I'd formed the business officially yet. She also walked me through how to handle the transition when I do form the LLC next month. Just wanted to follow up and say it actually works, and I got the answers I needed directly from the source.

Something important no one's mentioned yet - if you're already employed somewhere and have taxes withheld from your paycheck, you might be able to avoid quarterly payments by increasing your withholding at your day job. I did this last year when I started my side business. I just filled out a new W-4 with my employer and had them take out an additional $150 per paycheck to cover the taxes from my side gig. Saved me from having to deal with quarterly payments!

Just be careful about NOT forming your business in certain states. I was in exactly this position last year but in California. Started making money before i officially formed my LLC and the state hit me with a $800 minimum tax for the CURRENT year even tho i only formed it in november! Total scam. Make sure you research your state's rules before rushing to form an LLC.

I went through this exact same situation two years ago! You definitely need to pay quarterly taxes on that income even without the LLC formed yet. The IRS doesn't care about your business structure - they care about the income you're earning. With $3,500 so far this year, you're likely looking at owing around $500-700 in self-employment tax alone (that's the Social Security/Medicare tax at 15.3%), plus regular income tax on top of that. If you expect to make more throughout the year, you could easily hit that $1,000 threshold that triggers the quarterly payment requirement. My advice: don't wait until you form the LLC. Calculate your estimated taxes now using Form 1040-ES and make the payment. You can always adjust future quarters once your LLC is formed. The penalties for underpayment can be way more expensive than just paying a bit extra now to be safe. Also, keep those spreadsheets organized! You'll need them for Schedule C when you file, whether you're still a sole proprietor or have formed the LLC by then.

Great question! As someone who's helped many clients through this transition, I want to clarify a few key points that might save you some headaches. First, regarding the $500-700 self-employment tax estimate - that would be roughly what you'd owe for the full year if you only made $3,500 total. But since you're asking about quarterly payments, you need to project your full-year income. If you think you'll make $10,000+ this year, you're looking at significantly higher tax obligations. For quarterly payments, you should estimate your total annual business income, then pay 25% of your expected annual tax liability each quarter. Don't just base it on what you've earned so far - the IRS wants you to pay as you earn throughout the year. Regarding the LLC transition mid-year: it's actually pretty seamless for tax purposes. You'll report all your business income for the entire year on Schedule C, whether it was earned as a sole proprietor or after LLC formation. The LLC formation date doesn't create a tax filing break - it's all one continuous business year on your personal return. One tip: if you're unsure about your projections, it's often safer to pay a bit more in estimated taxes rather than underpay. You'll get any overpayment back as a refund, but underpayment penalties can be costly and annoying to deal with.