Simplify Your LLC Tax Filing this Season

An LLC, or Limited Liability Company, is a business structure in the United States that offers its owners (members) protection from personal liability for the company’s debts. LLCs combine the liability protection of a corporation with the flexibility and simplicity of a partnership or sole proprietorship.

LLCs are considered pass-through entities, exempt from direct taxation. Profits pass through to the owners, who then pay taxes on the earnings received. LLC members are subject to federal, state, and local income taxes, as well as self-employment taxes.

LLCs can be taxed as a sole proprietorship, partnership, S-Corp, or C-Corp. The tax treatment depends on the number of members and the election made by the LLC. The tax rates vary based on the chosen entity type.

So form 1065 is for an LLC taxed as a partnership, while from 1120-S is for an entity that has made the S-corp election.  So if you have an LLC and you have not make the S-corp election you will likely need from 1065.

Single-member LLCs are treated as pass-through entities by default, similar to sole proprietorships. Multi-member LLCs are also treated as pass-through entities, with members paying taxes based on their ownership stake.

Cleer Tax provides end-to-end tax solutions for LLCs, including planning, bookkeeping, and filing. With a team of experienced accountants, Cleer can assist small business owners in navigating tax complexities and optimizing cost-saving opportunities.

So form 5472 is used when a company has a reportable transaction with a foreign or domestic related party. In most cases this will mean that you have a non-US person or persons who own 25% or more of the company. It could also be used when you have a foreign company engaged in business in the US. If either of those sound familiar then yes you need a form 5472.

Form 5471 is required for companies that are shareholders in a foreign corporation. We can include a form 5471 for a dormant entity if it has less than $5k in income and expenses and less than $100k in assets.  If your business has active foreign subsidiaries please see our Foreign Subsidiary packages.  

Form 8825 is used by LLC’s that are treated as partnerships when they have real estate income.  Our pricing includes up to 3 properties.   

Form K-1 is used to report a partner’s share of income, deductions and credits.  Basically, this is how you know what to report on your personal income tax return. 

These forms are related to withholding tax on foreign partners’ share of effectively connected income, and can be used by LLCs that have foreign members.

The answer will depend on where you are incorporated and where you are doing business.  That said we do include 1 state tax return in our pricing.  If you need additional state tax returns we can file them for you, but there will be an additional charge. 

LLCs can elect to be taxed as an S-Corporation or a C-Corporation by filing Form 2553 or Form 8832, respectively. This election does not affect the LLC’s legal status.

Most LLC tax rates align with individual tax rates. The U.S. has a progressive tax system, with rates ranging from 10% to 37%. However, non-resident aliens and LLCs taxed as corporations may have different tax structures.

States generally tax LLC income similarly to individual income. LLCs may file state tax returns based on business conducted within each state. Some states, like Alaska and Florida, have no state income tax.

Most LLC members pay full self-employment taxes, covering both employer and employee contributions. LLCs taxed as corporations split these taxes between the business and individual members.

LLCs should choose the appropriate tax forms based on their type and tax treatment. Single-member LLCs use Form 1040, while multi-member LLCs use Form 1065. S-Corps use Form 1120S, and C-Corps use Form 1120.

Understanding tax requirements, maintaining accurate financial records, filing on time, maximizing deductions and credits, and seeking professional assistance can help manage LLC taxes effectively.

By default, LLCs are considered disregarded entities and are therefore exempt from paying taxes at the corporate level. However, owners may elect to have the LLC treated as a corporation for tax purposes, in which case the entity must file a corporate tax return.

Typically, LLC owners are not considered employees. However, if the LLC has elected to be taxed as a corporation, the owners can and may even be required to be treated as employees.

LLC members should file and pay quarterly estimated taxes to the IRS using Form 1040 ES based on their individual tax rates. These filings are due on April 15, June 15, September 15, and January 15.

Included among the tax deductions available to LLC owners are the Qualified Business Income deduction and a variety of business expenses. This includes deductions for health and disability insurance, office supplies, phone and internet services, business vehicles, and more.

S-Corporations continue to be pass-through entities, but with specific rules for salaries and distributions. C-Corporations file separate tax returns, and members report distributed earnings on their individual returns, potentially facing double taxation.

LLC/C-Corporation uses Form 1120 to report its income, gains, losses, deductions, and credits and to calculate its income tax liability. C-Corporation taxable income is taxed at a flat rate of 21%, and the profits distributed to shareholders in the form of dividends are again taxed at the individual level, resulting in double taxation. C-Corporations use Form 1099-DIV to report dividends (amount and type) and distribution income to both the IRS and shareholders. If a shareholder is a non-resident alien, they will receive Form 1042-S instead of Form 1099-DIV.

In some cases, selecting S-Corporation status for tax purposes can help LLC members reduce self-employment taxes if the company is profitable. LLC members qualify as employees of S corps, which means that they can split self-employment taxes for social security and Medicare between themselves and the business.

Many LLCs elect to be classified and taxed as C-Corporations to take advantage of certain tax benefits. Taxation under Subchapter C will result in lower taxes than taxation under Subchapter S. Regardless of the size of the taxable income, the net profit of corporations is taxed at a flat rate of 21%, which is less than the current maximum personal tax rate of 37%. Unlike businesses with pass-through taxes, C-Corporation revenues are not automatically taxable to the owners. Losses incurred by a C-Corporation can be carried over multiple years without expiration to offset its net income, thereby significantly reducing the corporation’s tax liability. Unlike other types of corporate entities, contributions that a C-Corporation is unable to deduct in the current tax year because they exceed its adjusted gross income limits can be carried over the next 5 years until they are totally offset.