Filling Business Taxes for LLC for the First Time

The excitement of starting a business has wild ride quality and a maze of paperwork and regulations that make up taxes. If you just formed a Limited Liability Company (LLC) with the intent to file your taxes for the first time, it’s natural to wonder what will be ahead. The good news? It is very manageable with the right knowledge. For those of you who are filing your LLC’s taxes, I wouldn’t say it’s very hard; I wouldn’t know it’s not a simple thing to do. Let’s assume you are either starting or even have a few years of experience. This blog explores the world of LLC tax filings and looks at the most common questions business owners have regarding it.

Do LLCs Pay Taxes?

The answer is yes, an LLC is taxed; however, the amount and form depend on the structure of your LLC. However, LLCs are pass-through by default, meaning the LLC itself doesn’t pay taxes. In such cases, profit and losses are passed through to the members of the LLC, which then reports them on personal tax returns. As a matter of fact, this setup can sometimes help to avoid the double taxation that C Corporations are pressed into.

• As the singular member of an LLC, the IRS will disregard the entity for tax purposes. This means that your LLC’s income and expenses will be reported on your tax return through Schedule C.
• Your LLC has more than one member. You will also have to file an informational return. The members would then report their respective shares on their tax returns.
• Not all LLCs decide to be taxed as an S Corporation or a C Corporation; if they do, however, taxes are filed differently. Know that for your business, always check with a tax professional to understand which option is best.

Does LLC File Taxes?

Now that we have an overview of whether an LLC pays taxes or not, you may have a question in mind: What tax form should you file? In other words, the correct answer depends on the type of LLC under which your company is structured. But most commonly, the forms your company will need include:

• Single-Member LLC: Keep in mind that if you are the sole owner of the LLC, your business taxes are filed on your tax return and reported on Schedule C, which is part of Form 1040. In addition, if you are responsible for paying self-employment tax, you will need to file Schedule SE.
• Multi-Member LLC: In a multi-member LLC, the business that registers is allowed to file Form 1065 as the U.S. Return of Partnership Income. This form has the LLC report its income, deductions, and more. Individual members report on their tax returns and their shares.
• If your LLC elects to be taxed as an S Corporation, it files Form 1120S. Like a partnership, it passes through the income or losses. 
• If your LLC Elects C Corporation Status, you will file Form 1120. The taxes on this are separate from the individual filing off the personal taxes on the part of the members, and the LLC itself pays the taxes.

You need to figure out which form is applicable to your LLC, as filing in the wrong one will lead to offending penalties or a delay.

Is There Any Deduction an LLC Can Use?

The perk with LLC is that you can deduct business-related expenses from your taxable income. The most common deductions fall under this category:

• Deductible Business Expenses: These would include office supplies, software, rent for the office, utility payments, etc., which are all necessary expenses incurred within the business.
• Vehicle Expenses: If you own a car and use it for business, you can claim mileage or actual expenses against the car’s expenses.
• Employee Business Expenses: As a work-from-home employee, you can deduct part of your rent or ownership, utilities, etc. Be sure to follow the IRS rules for this.
• Some costs related to being the business owner may be deductible if you provide health insurance for yourself or anyone else if they’re covered under your specific health plan.

However, remember to write down every business expense during the year, which will make it easier to file. Good recordkeeping is important to ensure that you receive all the deductions that you’re eligible for.

Should You Hire Someone or Do It Yourself?

For someone who has never done this before filing LLC taxes, it makes sense to consult a tax professional. An investment in a tax expert will help you understand the intricacies of LLC taxation and file it correctly so that they take hold of all the deductions possible. In addition, they will guide you out of expensive errors, which can lead to penalties.

If you do not know what to do and are looking for some help, companies like H&M Tax Group can help you get through the process, so filing taxes isn’t as stressful. These people work mostly with small business owners and LLCs, and they can design their services based on your individual needs.

Conclusion

Making your first go at filing taxes for your LLC might seem tedious, but with some help and a little preparation, you can make it all seem easy. However, if you do know the tax forms, understand the right deductions, and may or may not hire a professional, you will be able to make sure your LLC is on the right track. Don’t forget to seek help when you have doubts. Companies like H&M Tax Group are available to ensure that the process is smoother and that you can concentrate on growing your business.