LLCs are not subject to corporate taxes because they are pass-through entities. Instead, the owners receive a pass-through of the business’ gains and losses, which they then record on their personal tax returns. Due to this, LLCs are required to submit a Form 1065, or Partnership Return, yearly tax return to the IRS.
LLC owners are required to file their own individual tax returns using Form 1040 in addition to the partnership return. The Schedule E attachment to this form lists the LLC’s income and losses for the IRS.
How to Obtain an EIN Number You must obtain an Employer Identification Number (EIN) from the IRS before filing LLC taxes. This number is used to tax-identify your business and is necessary for creating a business bank account, filing tax returns, and recruiting staff.
Getting an EIN is a straightforward procedure that may be completed online via the IRS website. Basic information regarding your company will need to be provided, such as its name, address, and kind of business entity (in this example, an LLC). Your EIN number will be provided to you immediately after your application has been submitted.
LLCs are able to display a loss for as many years as required. In fact, many small businesses make a loss during their initial years of operation as they engage in expansion and improvement. The IRS may consider your firm as a hobby rather than a legitimate business and disallow any losses on your tax return if it routinely exhibits a deficit year after year. Does an LLC Need to Be Profitable?
LLCs must be run with the purpose of producing a profit even though they are not compelled to do so. The IRS may designate your business as a hobby and disallow any losses on your tax return if it finds that it is not being run with the intent to make a profit.
In conclusion, it is possible to file your LLC taxes independently, but it’s crucial to comprehend the rules and assure appropriate reporting. Make sure you apply for an EIN number, submit the necessary tax documents, and run your company with the goal of turning a profit. Consult with a tax expert if you have any questions about the filing procedure.
You might be eligible to claim a tax deduction for that loss on your personal tax return if your LLC business has a loss during a specific tax year. This does not guarantee that you will get a tax refund, though. The deduction amount will vary depending on your own tax status and whether you have additional income to make up for the loss. It is advised that you seek advice from a tax expert on your particular situation.