How to File LLC Taxes in Mississippi? (A Complete Guide)

Filing state and federal taxes is important to running a successful Mississippi business that is also compliant with the Secretary of State.

To help you understand the tax filing requirements, we solicited legal advice from our in-house team of certified LLC attorneys with over sixteen years of experience in the business sector.

At Venture Smarter, we spent the past three weeks reviewing the official Mississippi Department of Revenue website for the correct business tax requirements, and here's a summary of our findings.

Quick Summary

---

---

How Are LLCs Taxed in Mississippi?

LLCs are taxed in Mississippi as pass-through entities based on the number of members. A single-member LLC is taxed like a sole proprietorship, and multi-member LLCs are taxed like partnerships.

The Mississippi Department of Revenue allows limited liability companies to select C or S Corp tax status by filing special forms with the Internal Revenue Service (IRS).

State Taxes for Mississippi LLCs

Here's the breakdown of state taxes for different LLC structures in Mississippi.

1. Single-Member LLCs

The IRS considers a single-member LLC a disregarded entity for tax purposes.

In our case, we submitted a Schedule C form as part of our personal tax return.

The IRS form allows Mississippi LLC owners to declare the business's profit or loss, which is applied to their income tax rates.

2. Multi-Member LLCs

For taxation reasons, a multi-member LLC is considered a partnership, and to submit its federal income taxes, the LLC must complete Form 1065 [1].

Individual Mississippi LLC members of the multi-member entity must also get a Schedule K-1 to report their portion of the LLC's profits and losses on their tax returns.

3. LLCs Taxed as S-Corp

The IRS allows corporations and LLCs to have a S-corp tax election status by filing Form 1120-S. Once approved, the S Corp status allows a business to enjoy LLC pass-through taxation.

Based on our experience at Venture Smarter, an LLC with S-corp status can transfer revenue to its members without subjecting them to the 15.3% self-employment tax.

4. LLCs Taxed as C-corp

The default tax status for corporations is a C-corp, and a Mississippi LLC can be taxed as a C-corp.

However, in our case, we paid Mississippi's franchise tax ($2.25 for every $1,000 above $100,000) and corporate income tax (beginning at 5% for profits of at least $10,000) in addition to the federal corporation income tax of 21%.

Federal Taxes for Mississippi LLCs

Once you have a federal tax identification number, your Mississippi LLC must pay the following taxes:

1. Federal Withholding Tax

If your business hires employees, you must withhold and remit employee income taxes to the DOR. Submit an online company registration form to the DOR via Mississippi's Taxpayer Access Point (TAP) [2].

In our case after registering, we had a recurring filing requirement (usually monthly or quarterly).

Additionally, each year, you must reconcile the tax withholding made by your LLC using Form 89-140 [3].

2. State Income Tax

The Mississippi state income LLC tax is calculated based on your revenue amount; different income brackets have different state tax rates.

The graduated Mississippi income tax rates are as follows:

• 0% for the initial $3,000 of taxable revenue
• 3% for the next $2,000 of the taxable amount
• 4% for the next $5,000 of taxable income
• 5% on all taxable income over $10,000

You’ll pay income taxes based on the company’s taxable income.

In our experience, we elected our LLC to be taxed as a C-corporation. In that case, it was responsible for paying Mississippi's franchise tax return, which was $2.25 for every $1,000 above $100,000 we spent operating the business there.

Any property the firm has with a value larger than the sum of cash spent is counted as taxable assets, even if the first $100,000 is exempt from the franchise tax. Corporate franchise tax has a $25 minimum [4].

Other Taxes

Other additional business taxes your LLC may pay, as outlined by Venture Smarter, include the following:

1. Sales Tax

You must collect and pay sales tax if your Mississippi limited liability company (LLC) sells items to customers there.

This implies that the Department of Revenue will need you to register for this purpose; log in to the DOR website and register to pay the Mississippi sales tax of 7%.

"Once you receive a sales tax permit, you must provide reports on the state sales tax you've collected on a regular basis. "
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions

Our Mississippi sales tax filing frequency was determined by the total amount of tax we owed.

If the Mississippi sales tax is less than $600 for the year, you must submit it once. The DOR website offers online and mail options to file and collect sales tax.

2. Unemployment Insurance Tax (UI)

The employer taxes, like the UI tax for your Mississippi LLC, will fluctuate between 0.0% and 5.4% due to several factors.

A start-up's typical tax rate is 1% in the first year of responsibility, 1.10% in the second, and 1.20% each succeeding year until the employer qualifies for a reduced tax rate (often peaking at 5.4%).

3. Workers' Compensation

The projected Mississippi workers' compensation rate is $1.19 for every $100 insured payroll.

However, this can vary depending on many things, including how many employees your firm has, your work sector, how your business is run daily, and more.

Unless the employee is exempt, such as domestic or agricultural labor, all Mississippi enterprises with more than five employees must obtain workers' compensation insurance.

4. Local Taxes

Your LLC can be liable to regional Mississippi taxes depending on the county or city your firm is in. This varies from location to location and the type of business you operate.

Some regions require you to pay taxes on specific types of commerce, such as hospitality or tourism, and the privilege to sell specific items, like tobacco, cigarettes, or alcohol, in addition to sales tax.

For instance, Baldwyn levies a 2% tourism tax on the revenue from eateries, restaurants, and prepared food sales at convenience stores.

What is Tax-Deductible for an LLC in Mississippi?

The tax-deductible for an LLC in Mississippi are standard deductions, itemized deductions, child and dependent care tax credits, and earned income tax credits.

Related Articles:

• How to Set Up an LLC in Mississippi
• Premium LLC Formation Services in Mississippi
• Top Registered Agent Services in Mississippi

FAQs

References:

1. https://www.irs.gov/pub/irs-pdf/f1065.pdf
2. https://tap.dor.ms.gov/_/
3. https://www.dor.ms.gov/sites/default/files/Business/89140228.pdf
4. https://www.dor.ms.gov/business/corporate-income-and-franchise-tax-faqs