How Much Should I Save for Taxes as a Single Member LLC Owner?

Thanks for that explanation! So if I buy something like a laptop or office furniture for my business, does that count as an expense that reduces my taxable income immediately, or is that one of those things that needs to be depreciated over time? Also, does it matter if I pay myself a salary versus just letting the profits accumulate in the business account?

For items like laptops and office furniture, it depends on the cost. Thanks to Section 179 deduction and bonus depreciation rules, you can often deduct the full cost of qualifying business equipment and furniture in the year you place them in service, rather than depreciating them over several years. For 2025, you can expense up to $1,250,000 of qualifying equipment purchases under Section 179. As a single member LLC taxed as a sole proprietor, you don't technically pay yourself a salary. The IRS views you and your business as the same entity for tax purposes. Money you take from the business for personal use is called a "draw" and isn't deductible - it doesn't affect your tax liability either way. You'll pay taxes on the profit regardless of whether you leave it in the business account or transfer it to your personal account.

Did you find it worked well for figuring out estimated quarterly payments too? I'm struggling with that part since my income fluctuates so much month to month. Does it help you project for the whole year or just give you current numbers?

How is this different from just using regular accounting software like QuickBooks? I'm skeptical about these AI tax tools - seems like they'd just apply generic rules without understanding nuances of different businesses. Did it actually understand specific deductions for your industry?

It absolutely helps with quarterly payments! That was actually my biggest problem before - I'd either overpay and hurt my cash flow or underpay and get hit with penalties. The tool lets you input projected revenue patterns, so it accounts for seasonal fluctuations and gives you appropriate quarterly estimates based on your actual business cycle. Regarding how it compares to QuickBooks - the main difference I found is that while QuickBooks tracks your transactions, taxr.ai actually provides forward-looking tax strategy specific to your situation. It understood my industry deductions (like specific software subscriptions that are 100% deductible vs. certain meal expenses that are only 50% deductible). It's more like having a tax strategist than just tracking expenses.

How does that even work? Wouldn't the IRS need to verify your identity before discussing your tax situation? I don't understand how having someone else call would help with that part.

This sounds completely made up. There's no way you can just have some service call the IRS for you and then transfer you in. The IRS has strict security protocols. And even if it did work somehow, I highly doubt it would save much time - the real bottleneck is how many agents they have available, not how you get in the queue.

They don't discuss your tax situation without you - what happens is they navigate the initial phone tree and wait through the hold time (which is often 2+ hours). Once an actual agent is on the line, they conference you in so you can verify your identity and discuss your specific situation. The service just handles the awful waiting part. It absolutely works and does save time. The bottleneck is indeed the number of available agents, but the problem is most people can't stay on hold for 3+ hours during business hours. Claimyr basically does the holding for you, then brings you in exactly when an agent is available. I was skeptical too until I tried it - had my EIN issue resolved in one day after struggling for weeks to even reach someone.

This is so important! I got hit with a penalty my first year because I had no idea about quarterlies. Do you use a specific calculation method for yours? I've been doing 100% of last year's tax liability divided by 4, but I'm wondering if there's a better way since my business is growing fast.

I use the annualized income installment method since my income varies significantly throughout the year. Instead of four equal payments, I calculate each quarterly payment based on the actual income for that period. It's a bit more work but prevents overpaying in slow quarters. The safe harbor method you mentioned (100% of last year's tax liability, or 110% if your income was over $150,000) is definitely the simplest approach and protects you from penalties. But if your business is growing rapidly, you might end up with a big tax bill at the end of the year, even if you've made all your required quarterly payments.

This is what confused me at first too! I thought if I never "took money out" of my business I wouldn't owe taxes. Learned the hard way that the IRS doesn't care if the money stays in your business account - they care about the difference between income and deductible expenses.

Thanks everyone for all the amazing advice! I think I understand better now. So even if I physically keep all the money in my business account, I'll still owe taxes on the profit (revenue minus deductible expenses). And not all "reinvestments" count as immediate deductions - some have to be depreciated over years. I'm going to look more carefully at what types of business expenses I'm planning and see which ones are fully deductible now versus depreciated. Sounds like I should probably keep tracking my 30% savings based on profit rather than revenue, which will free up more cash for growth. And I definitely need to get those quarterly payments set up correctly!