5 Tips and Tricks to Filing LLC Taxes
One out of five.
That’s the number of small businesses that will fail within their first year, many of which are LLCs.
It’s scary to think that your business could be one of them.
But you don’t have to let your business become a statistic.
By learning how to file your LLC taxes, you can save money and potentially prevent legal trouble. Running an LLC is challenging enough; the last thing you need is financial woes.
Not sure where to start? That’s okay. If you’re confused about LLC taxes, these tips and tricks will help you make the process easier and save you money.
Keep reading to find out more about tax preparation and filing taxes as an LLC.
Single-Member LLCs Make It Simple
An LLC offers flexible taxing options. An LLC can file taxes as a C (standard) corporation or S (subchapter) corporation. They can also file taxes as a multi-member LLC.
But the easiest of these is a single-member LLC, which files taxes the same as a sole proprietor would. When filing as a single-member LLC, you will pay taxes based on your personal income rate and will report any income and expenses on your 1040, or individual tax return form.
Don’t forget that you will also have to pay tax for Medicare and Social Security. These taxes are part of your self-employment taxes.
Use Your Deductions
The IRS allows LLCs several deductions to lower their taxes. Equipment and supplies are one of them. Up to $100,000 can be deducted for business supplies and equipment, provided they are used for business purposes within the U.S.
Another deduction is retirement plan contributions. If your LLC contributes to an eligible employee retirement plan, such as a 401(k), these contributions can be tax-deductible.
Other deductions you can use are education fees, such as the cost of courses and books, subscriptions to trade publications, and convention and travel fees.
When in Doubt, Hire a CPA
Tax law changes constantly. It can be hard to keep up with changes from one year to the next. A good CPA (certified public accountant) can advise your business on tax preparation, regardless of your LLC’s size. They can even find deductions that are specific to your state.
CPAs are required to undergo an exam that covers tax laws, auditing, financial reporting, and more. The CPA exam, or Uniform Certified Public Accountant Examination, is known to be grueling, with low pass rates. By passing this exam and getting licensed, a CPA proves they have the acumen that a bookkeeper or accountant may not have.
Business owners should focus on their areas of expertise. For most people, that means leaving the accounting and tax preparation to someone else. For small business LLCs, that means hiring a CPA who can excel in areas you are weak in.
Use These Tips to Make Your Tax Preparation Easier
Use these tax tips for LLCs when filing to make your tax preparation easier. The last thing you want when filing taxes is an unwanted surprise.
