LLC Tax Guide: How to File LLC Taxes

What you’ll discover:

Remember to figure out the taxes you’re paying. Estimated Quarterly Taxes and Self-Employment Taxes Apply
Determine whether you owe income taxes in more than one state.

LLC taxes might be overwhelming at first, especially because you can pick how you wish to be taxed. In most states, there’s really no such thing as pure LLC taxes. You must instead either submit your taxes in the default form for your LLC or petition the IRS to be taxed as a different kind of organization. These are some basic principles for tax preparation.

Determine the Taxes You’re Paying

When you submit your LLC Operating Agreement or articles of incorporation to form your LLC, you will be given a default tax setting. If you form an LLC on your own, it will be taxed as a single proprietorship. You will be taxed as a partnership if you form an LLC with at least one other person. If you petition the IRS to modify the taxation status of your LLC, you must wait until your request is accepted. You cannot opt to submit your taxes in a different format on your own. If you do, you will be penalized by the IRS. The fines vary depending on the gap between the taxes paid and the taxes that should have been paid.

Remember Estimated quarterly taxes and self-employment taxes apply.

Be careful to account for quarterly estimated taxes and self-employment taxes when completing your LLC taxes. Both of these are true in the majority of business situations. If your LLC files its taxes as a company, it will not be required to pay self-employment taxes.

The quarterly anticipated taxes represent the amount of taxable revenue you expect for your LLC. The payments should ideally be even, which means that if you owe a total of $4000 in taxable income on your LLC, the IRS expects you to pay $1000 for each of the business quarters.

As an LLC, your self-employment tax is assessed at the same rate as sole proprietorship and partnership taxes. Recall that even if you have workers and must compute payroll taxes, you must still pay self-employment taxes.

Determine whether you owe income taxes in more than one state.

Remember that self-employment taxes do not include federal and state income taxes when filing your taxes. Each states manage state income taxes. One thing to keep in mind is that you might end up owing income taxes to two different states. This occurs when your LLC is formed in a state different than the one in which it is really situated. Individuals must submit their taxes in the state in which they live. But, since your LLC is formed in another state, you may be required to pay taxes in that state as well, though not all states mandate this. You will never be taxed twice on federal income tax.