For a single owner LLC taxed as a sole prop, is there any equivalent of a W2 salary like in a C Corp?

So if I understand correctly, I'll pay both income tax AND self-employment tax on all profits, regardless of whether I actually took that money out of the business account? And there's no way to pay myself a "salary" to reduce self-employment taxes like C Corp owners can?

That's exactly right. With your single-member LLC taxed as a sole proprietorship, you'll pay both income tax and self-employment tax (which covers Social Security and Medicare) on the net profit of your business, regardless of how much you actually withdrew during the year. Unlike C Corporation owners, you can't pay yourself a formal W2 salary to reduce self-employment taxes. However, if your business continues to grow, you might consider changing your tax election to be taxed as an S Corporation, which would allow you to pay yourself a reasonable salary (subject to payroll taxes) and take additional distributions that wouldn't be subject to self-employment tax.

How exactly does this work? Do I just upload my bank statements showing the transfers between accounts? I've been so confused about this whole LLC tax situation and my accountant charges me $150 every time I email a question.

I'm skeptical about these online services. Can it actually tell the difference between legitimate business expenses vs personal ones? That's where I always get tripped up with my LLC.

You can upload pretty much any financial documents you have - bank statements, profit and loss statements, even just screenshots of your accounting software. The system analyzes them and provides detailed guidance specific to your situation. It's especially good at explaining the tax implications of different business actions. For your expense categorization concerns, it actually does a surprisingly good job identifying patterns and flagging potential issues where personal and business expenses might be mixed. It's not just generic advice - it really analyzes your specific documentation and gives tailored feedback.

Wait, how does this actually work? Do they just call the IRS for you? Couldn't I just do that myself?

Yeah right. Nobody can get through to the IRS these days. I've tried calling about my LLC tax questions at least 6 times and always get disconnected after waiting 1+ hour. This sounds too good to be true.

They don't just call the IRS for you - they have a system that navigates the IRS phone tree and waits on hold in your place. When an actual IRS agent picks up, you get a call so you can speak directly with them. You're not paying for someone else to talk to the IRS; you're paying to avoid the ridiculous hold times. Yes, technically you could do it yourself if you have hours to waste sitting on hold. But I found the time saved was absolutely worth it, especially when I had specific questions about how my LLC draws should be handled for tax purposes. The IRS agent was able to confirm exactly what records I needed to maintain.

That's interesting - I've heard about this S Corp approach before. At what income level does it generally make sense to make that switch? I'm currently making around $85,000 in profit annually.

The general rule of thumb I've heard from tax professionals is that S Corp election starts making sense financially when your net profit is consistently above $60,000-80,000. At your $85,000 profit level, it could definitely be worth exploring. The main consideration is balancing the additional costs (more complex tax filing, payroll processing, etc.) against the self-employment tax savings. You also need to pay yourself a "reasonable salary" which the IRS expects to be in line with industry standards for your role. The remaining profit can then be taken as distributions without self-employment tax.

This! I made this mistake my first year and ended up with a $550 penalty. Now I use the IRS Form 1040-ES worksheet to calculate my quarterly payments.