How to File LLC Taxes in Alaska? (Step by Step Guide)
One of the major requirements for your limited liability company to stay compliant with the Alaska Department of Revenue is to file your LLC taxes correctly and on time.
To help you navigate the tax filing process, we sought expert guidance from our certified team of business specialists with over eighteen years of experience in the LLC sector.
We spent five weeks reviewing the Alaska Secretary of State's website for the correct tax forms details.
Here's a summary of everything you should know about LLC taxes in Alaska.
Quick Summary
- An Alaska LLC with a C-Corp elective status must pay a corporate income tax of 9.4%.
- Alaska does not levy a nationwide state income tax for LLCs.
- You must pay the unemployment insurance tax if you have employees in your LLC.
How Are LLCs Taxed in Alaska?
LLCs in Alaska are taxed as pass-through entities by default and based on the number of members. The LLC does not pay state income taxes; the members and managers do on their reports.
When filing the personal tax return, the members must include all the profit or loss share of the business plus other extra income they may have.
However, if you select your LLC to be treated as a C or S Corp, you'll have different tax requirements from the state.
State Taxes for Alaska LLCs
State taxes for LLCs in Alaska depend on how many members the LLC has. Let’s look at how different LLC structures are taxed.
1. Single-Member LLCs
By default, a single-member LLC is handled as a sole proprietorship in Alaska for tax purposes.
Alaska LLC business taxes for a single-member LLC are included in the owner’s personal income tax return.
A Schedule C form calculates and reports business profit, which considers all revenue, expenditures, cost of products sold, and costs for home-based firms. The net income, which represents the total taxable business income, completes the computation.
The owner (and their spouse) declare this net income on Schedule C and other gains and losses for their personal income taxes.
As the lone owner, you're also responsible for paying Social Security and Medicare taxes based on the business's revenue. The tax is not due if the company experiences a loss, but you won't be eligible for benefit credits for that year.
Other employment and real estate taxes also apply, and the local governments can impose a local option sales tax of up to 7.5%.
2. Multi-Member LLCs
In Alaska, a multi-member LLC is considered a partnership for tax reporting purposes. As such, these entities enjoy pass-through benefits, and the members report taxes on their income rates.
When filing Form 1065, LLC members must include all the items on their tax information [1].
Read more about how is a multi-member LLC taxed.
3. LLCs Taxed as S-corp
Unlike a C-Corp structure, an Alaska S-Corp doesn't pay income taxes. An S-Corp with more than one shareholder must file an LLC tax return.
The stockholders file their personal income tax returns with their share of the corporation's profit or loss.
To elect your LLC to be taxed as an S-Corp in Alaska, visit the IRS website and complete Form 2553 [2].
4. LLCs Taxed as C-corp
An LLC's owners can elect to have their LLC regarded as a C-corporation for tax reasons. Making this decision entails submitting IRS Form 2553 to the Internal Revenue Service (IRS); you can find the form on the IRS website.
In contrast to the normal pass-through tax scenario, the LLC must submit a separate corporate tax return when it chooses to be treated as a domestic or foreign corporation in Alaska.
Alaska corporate income tax is calculated using a range of marginal rates that currently go as high as 9.4%.
If your LLC has a C-corp elective status, you must pay the Alaska corporate income tax to the Department of Revenue (DOR).
Federal Taxes for Alaska LLCs
The federal income taxes for LLCs in Alaska include the following:
Self-Employment Tax
Any members or managers withdrawing money from Alaska LLC must pay self-employment tax.
Social Security, Medicare, and other benefits are covered by this levy, which is regulated by the Federal Insurance Contributions Act (FICA). The self-employment tax rate as of right now is 15.3%.
When determining how much self-employment federal income tax you must pay, you must deduct a portion of your company expenditures from your income.
Other federal taxes that your LLC might pay include the following:
- Federal unemployment taxes (FUTA)
- Local deductions
- State unemployment taxes (SUTA)
- Employee deductions
Learn how to reduce self-employment taxes.
Other Taxes
Other taxes that you must pay as a business owner in Alaska include the following:
1. Sales and Use Taxes
Alaska is one of the few states without a nationwide sales tax. As a result, unlike LLCs in most other states, you will not have to collect Alaska sales tax from the state if your LLC sells things there.
However, some localities and towns charge sales tax if you sell within their region; if this is the case, you'll collect the sales taxes at the point of purchase and pay them to the local or municipal authority.
Also, if you sell to clients in other states, you may be compelled to collect sales tax from them, depending on the tax regulations of those foreign states.
2. Unemployment Insurance Taxes
The Alaska unemployment insurance tax is a percentage of the salaries you pay your staff that must be paid to the state.
You must pay this tax if you engage one or more people to perform services for your firm. It would still apply if you hired the staff for a few hours of the day.
You must first determine your LLC tax rate before filing the unemployment insurance. The range for 2023 is 1% to 5.4% on the first $47,100 in salaries [3].
You must additionally withhold 0.56% of each employee's first $47,100 salary and report it to the state government as a portion of your payroll deductions.
"The amount deducted from the payroll is the employee's input to Alaska's unemployment insurance tax."
- David M. Steingold, Business Attorney
If you are a brand-new employer, the rate you pay may vary from 1.99% to 2.44%, contingent on the industrial category in which your company operates.
Related articles:
- How to Form an LLC in Alaska
- Professional LLC Formation Services in Alaska
- Looking Up an LLC in Alaska
3. Industry Taxes
Certain industries are taxed by the Alaska Tax Division. If your LLC operates in the following sectors, you might have to pay taxes based on the industry:
- Alcohol tax
- Gambling tax
- Tobacco tax
- Large passenger vessel excise tax
- Fisheries corporation income tax
- Taxes on mining licenses
- Taxes on gaming
- Taxes on motor fuel, oil, and gas production
- Taxes on oil and gas properties
- Taxes on rentals of vehicles
What Is Tax-Deductible for an LLC in Alaska?
The tax-deductible for an LLC in Alaska includes education credits, child care, senior citizen, and disabled veterans.
Other tax credits in Alaska include the following:
- Tax exemption for primary property of a military service widow or widower.
- Residential exemption of 40% of assessed value, up to $75,000 maximum.
- Nonprofit exemption for properties used solely for charity, educational or communal purposes.
- Disaster exemption for individuals or households residing or conducting business in an area affected by severe floods or landslides.
- Business property exemption if you have a total assessed value of $20,000 or more.
- Downtown housing tax exemption provided a minimum of 4 new residential units are built [4].
FAQs
What Are the Tax Advantages in Alaska?
The tax advantages in Alaska are no state income tax and no nationwide Alaska sales tax for a limited liability company. Members pay taxes on their individual reports.
Does Alaska Accept Federal Tax Extension for Partnerships?
Yes, Alaska accepts federal tax extensions for partnerships, provided they complete Form 7004 and the IRS approves it.
How Do I Know the Tax Classification for My LLC in Alaska?
You know the tax classification for your LLC in Alaska by looking at the number of members. A single-member LLC is classified as a sole proprietorship, while a multi-member LLC as a partnership. Alternatively, you can classify your LLC as a C or S Corp for taxation.
Do You Need Help Filing Your Alaska LLC Taxes?
As a business owner, you must be diligent when handling your LLC taxes with the IRS and the state.
This is why we recommend utilizing QuickBooks when organizing different business taxes.
QuickBooks allows you to manage local, state, and other federal taxes conveniently. Generating business tax details and forms for you and your employees is now easy as the QuickBooks integrated platform is digitized and automates all the processes.
References:
- https://www.irs.gov/pub/irs-pdf/f1065.pdf
- https://www.irs.gov/pub/irs-pdf/f2553.pdf
- https://labor.alaska.gov/estax/2023-experience-rates.html
- https://www.muni.org/Departments/finance/property_appraisal/Exemption/pages/default.aspx
