Taxes are an essential aspect of running a company. If you fail to pay them when they're due, you might end up in some serious legal trouble with the IRS.
When taxes are due for an LLC is a question that many people ask when they start their own business.
The answer to this question varies depending on when you formed your limited liability company and what type of taxation election you made when you formed it.
LLCs and Taxes
An LLC can choose to be taxed as either a sole proprietorship, partnership, or corporation, which is why there are different LLC tax forms.
An LLC is treated as a disregarded entity by default.
That means that the company is not taxed separately, and its owners are responsible for paying business taxes on their share of any profits.
In other words, LLCs are viewed as sole proprietorships. However, an LLC can be taxed as a corporation or partnership, but generally, an LLC will remain a "disregarded entity" unless it chooses corporate taxation (C or S corporation).
The deadlines for LLC business taxes will largely depend on how the LLC chooses to be taxed.
Unless you are a single-member LLC treated as a sole proprietorship by the IRS, you will have to choose your tax year accounting method: a fiscal year or a calendar year.
A fiscal year is 12 consecutive months, while a calendar year is the same as personal tax returns (January to December).
Both methods can be complicated if you fail to plan in advance. For instance, an LLC with a fiscal year may make estimated quarterly payments based on its taxable income for the previous quarter.
Even though this is not always required by law, it's a good idea to plan ahead and estimate your tax liability.
In contrast, if you do not file on time or forgo filing at all, the IRS can impose penalties or even seize your personal assets.
Because of the many tax filing options available to LLCs, it is important to seek professional advice from a trusted accountant who can help you navigate through this complex process and avoid any pitfalls along the way.
Tax Deadlines for Sole Proprietorships
LLCs taxed as sole proprietorships need to file Form 1040 (Individual tax return), the deadline to file taxes is May 17. Form 1040 should be filed with Schedule C, and it serves to pay federal income tax that covers all income, losses, and annual expenses of a single-member LLC.
The LLC itself is not doesn't file any business tax because it is not a separate legal entity.
Tax Deadlines for LLC Partnerships
Unlike sole proprietors, partnerships pay taxes on a partnership tax return. LLCs with two or more owners are viewed as partnerships for tax purposes.
The federal government requires partnerships to file an annual income tax return and pay taxes by the 15th day of the third month after each fiscal year ends (March 15).
Partnerships that fail to make estimated quarterly estimated tax payments will be subject to penalties on amounts owed.
Business income is reported on the income tax return for partnerships, also known as Form 1065. each member must be handed a Schedule K-1 to report their share of the business's income or loss on his/her personal income tax return.
Keep in mind that if you opted for the fiscal year to determine your tax due date, the tax filing deadline is the 15th day of the fourth month after that fiscal year (March 30).
The best way to ensure you meet all tax deadlines is by using accounting software or SMB bookkeeping service and keeping track of your income, expenses, and taxes due on a daily basis.
Tax Deadlines for LLC Corporations
If your business structure is taxed as a corporation (see LLC vs C Corp) instead of an LLC or sole proprietorship, there are some differences in what you need from those entities outlined above.
For example, corporations have their own filing deadlines apart from those applied to other types of business entities.
Corporations file taxes depending on the tax filing deadlines they previously chose for their tax year - calendar year or fiscal year.
April 15 is the date by which all corporations must file their personal income tax returns if it's the calendar year that they opted for.
In case an LLC tax deadline filings according to a fiscal year, you need to file a corporate tax return by the 15th day of the fourth month following the close of your corporation's tax year.
Keep in mind that S corporations can't opt for a fiscal year and must follow calendar year tax filing deadlines.
Read more: LLC vs S Corp
LLCs and Estimated Tax Payments
A small business owner who has an LLC is required to pay estimated taxes throughout the year. If you are self-employed, as most small business owners are, you need to take care of self-employment taxes.
A small business owner is obligated to make quarterly tax payments every three months, starting in January.
For all small business owners and self-employed entrepreneurs, it's crucial to understand how to make estimated tax payments.
It can get confusing if you don't know what to do when your LLC has to pay estimated quarterly taxes, so it's best to look into it or seek business tax advice from a professional.
Related Article: Filing An LLC Tax Extension
Do LLCs Pay the Excise Tax, and When?
Small businesses that provide taxable goods and services need to pay excise tax on those items.
Excise taxes are calculated as a percentage of the sale price, making it is an invisible cost for consumers. Only businesses that make taxable sales or offer taxable services have to worry about paying these types of per-unit levies.
Excise tax is not the same as income tax. Business owners need to make quarterly payments and submit IRS Form 720 every three months of the calendar.
For January to March, excise tax returns are due by April 30; April to June are due by July 31, July to September by October 31, and October to December until January 31.
How Often Do Small Businesses Pay Payroll Taxes?
It depends on the payroll. LLC that has employees or even hires an independent contractor must pay payroll taxes for each employee or contractor. FICA (Medicare and Social Security taxes) and federal taxes are among the most common types of tax withheld from employee paychecks.
The amount of payroll will determine the tax season, i.e., whether you'll pay it once a year or quarterly.
Do I Need to File an Extension for LLC?
If you realize you won't be able to pay taxes on due dates, you can file for a tax extension.
The IRS does not require the owner of an LLC to submit an estimated tax payment with their extension form. Instead, you'll need to file a personal tax return extension as well.
The extension dates vary depending on whether you're a sole proprietor, S corporation, C corporation, single-member or multi-member LLC, or a partnership.
Does an LLC File Corporate Tax Returns?
LLC taxed as a corporation pays taxes through Form 1120. A C corporation income tax return is not connected with flow-through items to 1040 from a C corporation return.
However, if a qualifying LLC desires to transform into an S Corporation, it must complete and file Form 1120S.
In that case, Schedule K-1 (Form 1120S) is used by each owner to report their proportionate share of corporate revenue, tax credits, and deductions.
How Do I File Taxes for an LLC with No Activity?
LLC with no activity is still obligated to file taxes unless they choose to dissolve their business entity entirely.
If you're a sole proprietor, you don't need to file Schedule C but still have to file your personal tax return. Partnerships and corporations need to file taxes regardless of their activity.
What Happens if LLC Does Not File Taxes?
If you fail to meet your tax day filing deadline, then you are subject to paying interest and fines. Failure to file taxes can result in the state revoking your LLC's business registration certificate.
The Secretary of State will issue a fine or penalty for this.
It's important to take care of your LLC taxes and file them accurately.
You need an accountant who will work with you, not just for you.
This way, they can help you avoid any mistakes that may cost more in the long run than they would if caught early on by a professional tax preparer.
Remember, it is always better to be safe than sorry when filing your business income tax return as an LLC owner.