How to File LLC Taxes in New York? (Step by Step Guide)

If you are a New York LLC owner, keeping your business legally compliant with the state involves understanding and fulfilling your LLC's tax obligations at the local, state, and federal levels.

To help you understand these taxes, we have gathered a team of LLC experts with over two decades of experience in the business tax sector.

Drawing from their extensive knowledge and our three-week research on the official federal, state, and local government websites, this article covers all taxes New York LLCs are responsible for filing.

Quick Summary

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How are LLCs Taxed in New York?

LLCs in New York are taxed as pass-through entities. The tax responsibility passes to its members and their personal tax returns.

Therefore, members of the LLC only pay taxes at the individual level.

Further, all New York LLCs must pay an annual filing fee. The filing fee is $25 to $4,500 based on the LLC's gross income [1].

Besides this mandatory tax requirement, other state, federal, and local taxes are imposed on the business.

State Taxes for New York LLCs

Drawing from our firsthand experience, we've come to understand that state taxes for New York LLCs depend on the structure of the LLC.

Essentially, LLCs file taxes depending on their classification by the Internal Revenue Service (IRS) at the federal level, then flow through to the New York Department of Taxation and Finance.

Here's how.

1. Single-Member LLCs

A single-member LLC is taxed as a sole proprietorship in New York.

Further, you must pay self-employment tax as per your income rate.

The state of New York uses tax brackets based on your income to determine your income tax rate.

The New York state income tax rate starts at 4% for income up to $17,150, and the rate will go up to 10.90% for income starting at $2,510,500 [2].

"All of the business income and expenses must be reported on the individual's New York State personal income tax returns, including Federal Form 1040."

- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions

2. Multi-Member LLCs

A multi-member LLC in New York gets taxed as a partnership.

In our case as owners of a multi-member company, all the LLC members pay state income taxes on their personal income tax return by filing Form 1065.

The LLC may also file a Form IT-204, Partnership Return to the state [3].

3. LLCs taxed as S-corp

LLCs can elect to be taxed as an S-corp by filing a Form 2553 with the IRS.

Drawing from my professional experience, an S-corp filing status is attractive to most LLCs since the LLC is not subject to corporate income tax at the federal level, and shareholders only pay income taxes on their share of the corporation's net income on Form 1120-S. 

S-corps in New York must pay the corporate franchise tax ranging from $25-$4500 based on New York receipts.

4. LLCs taxed as C-corp

A C-corporation status is the default filing structure for federal income tax purposes elected through Form 8832.

C-corps frequently qualify for more tax deductions than pass-through LLCs, which may result in some financial savings for your company. A C-corp LLC files Form 1120 with the IRS.

New York C-corps are subject to a 21% federal corporate income tax and a corporation franchise tax calculated based on New York Corporation's Business Income Base, Fixed Dollar Minimum (FDM), or Business Capital Base [4].

Here's how.

Business Income Base

The federal taxable income of a New York corporation determines its business income tax rate base.

Corporations in New York are normally only taxed at a rate of 6.5% on $290,000 or less, with some eligible New York manufacturers receiving a flat 0% rate.

A New York corporation pays tax at 7.25% for every dollar of federal taxable income above $290,000 but under $390,000 and at 4.35% for every dollar more than $390,000.

Fixed Dollar Minimum (FDM)

New York C corporations using FDM pay a flat cost depending on their New York State receipts rather than a percentage. The fixed dollar minimum tax starts at $25 for state receipts at $100,000 or less and goes as high as $200,000 for over $1,000,000,000.

Business Capital Base

New York corporations may be subject to corporation franchise tax at 18.75% on the total investment and business capital allotted to the state after deducting short- and long-term liabilities related to assets.

Federal Taxes for New York LLCs

New York LLCs are subject to federal self-employment and income taxes: 

1. Federal Self-employment Tax

From my experience with New York LLC laws, all members of the company must pay self-employment tax on the LLC income.

The income is taxed at 15.3%, comprising 12.4% for Social Security and 2.9% for Medicare. S-corps are not subject to the 15.3% tax rate, but individual members must remit the amount on their salaries.

"Get your LLC a Federal Employment Identification Number to file all your local, state and federal taxes, track income and financial transactions."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions

2. Federal Income Tax

LLCs don't pay federal income tax directly since LLCs undergo pass-through taxation.

Instead, the LLC's revenue passes through to individual members and shareholders, who file federal income tax on their tax returns.

Federal income taxes vary depending on the LLC revenue, filing status, tax bracket, and deductions.

Related Articles:

• How to Set Up an LLC in New York
• Top LLC Formation Services in New York
• Premium Registered Agent Services in NY

Other Taxes

Besides the federal and state taxes, LLCs must pay the following: 

1. Sales and Use Tax

Most tangible goods and services are subject to a sales and use tax in New York, as in nearly every state. The standard sales tax rate in New York is 4%, although additional rates may be added by the city, county, and school district.

2. Local New York Taxes

On top of the sales tax, some cities/counties impose a local tax on particular goods and services. For instance, restaurants and caterers selling food and beverages are subject to a 4.5% sales tax in New York City.

In this case, New York City also levies a 0.375% Metropolitan Commuter Transport District tax, which raises the overall sales tax rate to 8.875%.

3. New York State Employer Taxes

LLCs with employees must pay the following employer taxes:

• Withholding Tax: New York State requires employers to withhold state income tax from employee wages and submit the sum withheld to the state's Department of Taxation and Finance.
• Workers’ Compensation: Additionally, all employers must provide worker's compensation insurance for employees. The cost of workers' compensation will vary depending on the size of the company and the nature of the work that employees do.
• Unemployment Insurance Tax: Employers must also pay unemployment insurance taxes. The rates range from 2.025% to 9.825%. For 2023, new employers will have to pay a rate of 3.4%.

4. Industry Taxes

Some of the industries charged specific taxes in New York include: 

• Cigarettes and tobacco
• Alcoholic beverages
• Mortgage recording

What is Tax-Deductible for an LLC in New York?

The tax-deductible for an LLC in New York includes itemized deductions such as medical and dental expenses, gifts to charity, mortgage, and investment interest.

These deductibles must be filed in Form IT-196.

Other New York LLC deductibles include: 

• Equipment (machines, etc.) purchased for business operations
• Tangible personal property used in business
• Business vehicles with a gross vehicle weight of over 6,000 lbs
• Off-the-shelf computers
• Computer software
• Office furniture and equipment

FAQs

References:

1. https://www.tax.ny.gov/pit/efile/annual_filing_fee.htm
2. https://www.tax.ny.gov/forms/html-instructions/2022/it/it201i-2022.htm#nys-tax-rate-schedule
3. https://www.tax.ny.gov/pit/efile/llc_llp.htm
4. https://www.tax.ny.gov/bus/ct/def_art9a.htm