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What Documents Do I Need To File My LLC Taxes?
Running an LLC can get tricky, especially during tax season. New owners might be having questions like “What documents do I need to file my LLC taxes?” and “Which LLC tax filing form should I use?” So, here’s a simple guide on all important tax forms and documents you will need when paying LLC taxes.
Table of contents
Key Takeaways:
- LLC owners can choose to be taxed as a sole proprietor, partnership, S Corp or C Corp
- Form 1065 is the default tax form for multi-member LLCs.
- LLCs that are pass-through entities can avoid double taxation.
What tax forms do I file for an LLC?
When you set up an LLC, you have several options for how it can be taxed. You can choose to be taxed as a sole proprietor, a partnership, an S corporation or a C corporation. The LLC tax filing forms you’ll need to fill out and submit depend on the choice you make for your business taxes.
So what tax form does an LLC file? It could be a Schedule C, Form 1065, Form 1120-S or a Form 1120.
Schedule C
If you're a single-member LLC, you may be asking "What tax form do I file an LLC?" For LLCs taxed as sole proprietors, Schedule C is the go-to form which you attach to your 1040 form to report income and expenses for your business. This LLC tax filing form is crucial because it helps the IRS understand how much money your business made or lost over the year.
Imagine you're an Etsy seller who sells handmade trinkets. Throughout the year, you’ve earned $50,000 in sales. You’ve also spent $20,000 on materials, shipping and other business expenses. Using Schedule C, you’d report the $50,000 in income and subtract the $20,000 in expenses, leaving you with a net profit of $30,000. This $30,000 is what you’ll pay LLC taxes on.
One important thing to remember is that as a sole proprietor, you’re responsible for self-employment taxes. These include Social Security and Medicare taxes, which are usually taken out of an employee’s paycheck by their employer.
Form 1065
A multi-member LLC is usually taxed as a partnership unless you choose to have it taxed as a corporation. If you stick with the default partnership taxation, you’ll need the LLC tax filing Form 1065.
Once Form 1065 is taken care of, each member will get a Schedule K-1. This form shows their share of the business’s profits and losses. You'll need Schedule K-1 to report your part of the profits and losses on your personal income tax return. Just remember, you can’t complete your personal tax return until Form 1065 is filed.
For example, if you and a friend run a consulting business as an LLC, you’ll file Form 1065 at the end of the year. Suppose your business made $200,000 in revenue and had $50,000 in expenses.
After filing, each of you gets a Schedule K-1 showing your $75,000 share of the profits. You’ll use this K-1 to report your share on your personal tax return. Filing Form 1065 correctly is important for handling LLC taxes.
It makes sure everyone reports their income correctly and avoids issues with the IRS. Keeping good financial records all year and hiring a tax pro if you need some extra help will make this process much easier.
Form 1120-S
Form 1120-S is an important LLC tax filing form for LLCs electing to be treated as S Corporations for tax purposes. While multi-member LLCs typically file taxes using Form 1065, those opting for S Corp status have to use Form 1120-S.
LLCs are inherently flexible business entities, offering limited liability protection while affording pass-through taxation. However, electing S Corp status can provide potential tax advantages.
Unlike traditional LLC taxation, where all profits are subject to self-employment taxes, S Corps allow for a portion of income to be distributed as dividends, thereby avoiding some self-employment taxes. This is an important difference in the S Corp vs LLC taxes debate.
S Corps and LLCs are also both pass-through entities. Both pass-through their income to the owners, who report it on their personal tax returns. However, S corps have stricter ownership requirements and are subject to specific rules like holding regular shareholder meetings and maintaining accurate corporate records. If your LLC is taxed as an S Corp, your business returns have to be filed by March 15.
Form 1120
Form 1120 is the LLC tax filing form used when an LLC opts for C Corp taxation. While most LLCs typically use Form 1065 for taxes, choosing C Corp status means switching to Form 1120.
When an LLC is taxed as a C Corp, there's a risk of double taxation. This means your business profits are taxed at the corporate level and then again when the dividends are paid to shareholders, leading to higher taxes.
Despite this risk, choosing to have your LLC taxed as a C Corp can be beneficial. C Corp owners find it easier to raise capital and protect their personal assets from their business due to the separation.
FlyFin’s expert CPA team can guide LLC owners through their tax filing process and provide advice on LLC tax forms and handling LLC taxes and deductions. They can even prepare and file your returns. AI also scans your expenses to find all the business deductions you can use to lower your tax bill.
Other important LLC tax documents
When it comes to completing a tax return for an LLC, the required documents may seem daunting, but they're pretty standard across the board for most businesses. They cover crucial areas like income, expenses, assets and payroll. Let's break down what you'll need in each category.
First up, income records. These are the backbone of your financial planning and include documents like bank statements showing your business deposits, sales receipts, invoices sent to clients and any 1099-NEC forms if you were paid over $600 as a contractor.
Next, let's talk about expenses. To deduct business expenses and lower your taxable income, you'll need evidence to back them up. Think canceled checks for vendor payments, invoices for products and services purchased, credit card statements showing charges and bank statements proving payment. If you want to know what business expenses you're allowed to deduct, use a 1099 tax calculator.
Now onto asset and depreciation records. If your LLC owns assets, you'll want to keep track of purchase and sales records, including acquisition details, purchase prices, any improvements made, depreciation deductions and details of any asset sales or disposals.
Last but not least, payroll records. If your LLC has employees (beyond just the owners, unless you're taxed as a corporation), you'll need to keep meticulous records. This includes W-2s issued to each worker, quarterly and annual payroll tax returns, state payroll tax and unemployment tax returns and detailed pay records for each employee like time sheets.
Keeping good records is key for LLC taxes each year. The right documents back up all your numbers, helping you avoid IRS issues. Make sure to gather and organize accurate business records all year long. It'll save you time and hassle come tax season when you have everything you need to fill out your forms and file correctly.
What’s FlyFin?
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