After you’ve formed an LLC and set up your business for operations, it could be time to file taxes. Yes, it comes on you before you know it! While state filing requirements vary, they may be different according to your business entity as well. Where you do business, how many people you employ, and even the type of business can affect how you file taxes.
Read on to understand filing business taxes for LLC for the first time, from deadlines to key considerations.
Understanding LLC Tax Filing Requirements
There are different tax filing requirements for an LLC depending on the number of members, with unique implications for each. LLCs are, in most states, pass-through entities. That means any income or losses are passed onto the owners and can be reported on the individual income tax return.
First, according to the IRS, a single-member LLC is treated as a pass-through entity unless the LLC elects to be taxed as a corporation. An LLC with only one member is considered a separate entity for purposes of employment tax and certain excise taxes.
Multi-member LLCs can also use pass-through taxation. That means the owners, called members, pay income tax based on their share of profits and report it on their personal income tax returns.
For example, if the LLC makes $21,000 annually and has two members with equal 50% shares, each member would report $10,500 of profit on their individual income tax return. If one member has a 70% share and the other has 30%, they would report the profit as $14,700 (70%) and $6,300 (30%).
The profit distribution proportions remain whether the LLC makes $200,000 a year or $2 million a year. Learn more about filing taxes for an LLC with no income here.
How to File Taxes as a Single-Member LLC?
As a single-member LLC, you’ll usually report the profit or loss from your business on the IRS Form 1040 and report your business tax information on Schedule C. The IRS treats a single-member LLC as an entity disregarded separate from its owner.
However, the owners can elect to be treated as a C-corporation by filing IRS Form 8832 or as an S-corporation by filing Form 2553.
How to File Taxes as a Multi-Member LLC?
A multi-member LLC is also treated as a pass-through entity by default. As in the example above, each member or owner will report the LLC’s profit or loss in proportion to the profit distribution stated in the LLC’s operating agreement.
According to the IRS, an LLC with multiple owners will be taxed as a partnership by default. However, the owners have the option to file Form 8832 and elect to be classified as an association taxable as a corporation, or file Form 2553 to elect to be an S-corporation.
How to File Taxes as a Corporation?
If you file taxes as a corporation, you can elect to be a C-corporation or an S-corporation. A C-corporation is the default corporation under IRS rules. However, an S-corporation has special tax status with the IRS, so it is often the preferred option for LLC owners. Here’s how to file taxes in either case.
When filing taxes as a C-corporation for the first time, you must file separately for the corporation. You won’t report company earnings on your individual income tax return. First, as a corporation, you’ll need to pay estimated corporate tax throughout the year.
Then, you will file a corporate tax return on IRS Form 1120. Shareholders report any dividends received from the corporation on their personal tax returns.
When filing taxes as an S-corporation for the first time, you must file separately and won’t report company earnings on your individual income tax return. Again, as an S-corporation, you’ll need to pay estimated tax payments for certain S-corporation taxes.
To file an S-corporation, you’ll use IRS Form 1120S. This form reports the S-corporation’s income, expenses, and losses. You’ll also need to file IRS Form K-1 for each of your corporation’s shareholders. Form K-1 shows each shareholder’s income, deductions, and credits related to their share of the corporation.
The S-corp must provide shareholders with copies of their K-1 forms to report their corporate income or loss on their personal income tax returns.
Self-Employment Taxes as an LLC Owner
Unlike regular employees whose employers withhold their taxes from their paychecks, LLC owners are responsible for paying self-employment taxes directly. These taxes include employee and employer portions of Social Security and Medicare taxes, equal to an additional 15.3% of income. You’ll need to plan for this additional tax payment and include it in your estimated taxes throughout the year.
State Income Taxes for Your LLC
In terms of state income taxes, the requirements vary by state. Some states may have specific forms or tax obligations for LLCs, while others may treat LLCs similar to those treated for federal tax purposes. Nine states don’t have state income tax, including Alaska, Florida, Nevada, and Wyoming.
Estimated Tax Payments for Your LLC
Estimated tax payments are periodic payments made throughout the year to cover the LLC’s income tax liability. These payments are necessary if your LLC is expected to owe $1,000 or more in taxes when you file your annual tax return. To pay estimated taxes, you can use Form 1040-ES. The IRS gives you the option to pay estimated taxes online.
Deadlines for Filing Business Taxes as an LLC
The deadlines for filing taxes for single-member, multiple-member, C corporation, and S corporation LLCs are all April 15 but could be extended to April 18, depending on the day of the week Emancipation Day falls in the District of Columbia.
Corporations, LLCs, and individuals can all file an extension for taxes. The extension is good for six months. For 2023, to receive the extension, you need to have filed an extension with Form 4868 by April 18, and you’ll need to file the taxes by October 16.
When you file for an extension, you must submit your estimated payment for the remaining amount due on the initial filing date. Then, when you file the return, you may have to make an additional payment for the difference or receive a refund if you paid too much. Learn more about tax filing deadlines for LLCs here.
Potential Tax Deductions Available for Your LLC
There are many business-related expenses you can deduct and report on your income tax return. These deductions include business-related expenses such as rent for your office space, utilities, office supplies, equipment purchases, advertising and marketing, professional fees for legal or accounting services, insurance premiums, wages and benefits of your employees (if you have them), and any taxes you pay on the employee’s behalf.
Final Tips for Filing Business Taxes for LLC for the First Time
Filing taxes for an LLC is easier with diligent record-keeping and accounting. Remember to double-check the required form, pay estimated federal and state taxes on time, and check with a CPA or tax professional about your LLC’s situation.
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How to determine which tax form to use for your LLC?
Can I file my business taxes online, or do I need to mail them?
Can I get a tax refund for my LLC?
The LLC will only receive a tax refund if it elects to be taxed as an S-corp or C-corp. Otherwise, the LLC members would be responsible for paying estimated taxes and receiving any tax refund if they paid more than due in estimated taxes.
What happens if I miss the deadline for filing my business taxes as an LLC?
If you miss a deadline, you could be penalized for failure to pay and failure to file. The penalty amount for failure to pay is based on the amount you owe and increases the longer you delay payment. Pay immediately, and speak to a CPA or business tax expert to understand further implications for your business.
What are the consequences of underreporting income or overclaiming deductions for my LLC?