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Required LLC Tax Form
When a business is registered as a Limited Liability Company it is governed by the state laws that permit its creation. In order for the federal government to recognize it as a business structure, it has to elect its classification with the IRS. The only business structures recognized by the federal government are sole proprietorships, partnerships and corporations. Therefore, when you form an LLC you have to file the tax form 8832 that allows you to elect the business classification that will be used for taxation purposes. This classification should also be specified in the LLC's business contract so that the members are aware of it.
When you form an LLC, the entity classification election using tax form 8832 enables you to specify the effectivity date of the classification. The effectivity date can be indicated in space provided for in the tax form but not to exceed 12 months from filing. The IRS will routinely categorize single member LLCs as sole proprietorships if no tax form 8832 has been filed. The default categorization for multiple member LLCs is partnership. The same tax form can be used to amend the classification of the LLC.
An added implication for the filing of tax form 8832 is in the reporting and payment of employment and excise taxes. Before 2009 a single member LLC was allowed to report and pay the employment and excise taxes using the member's personal EIN. This guideline was amended in 2009 requiring the LLC to use the EIN assigned to it in the reporting and settling of such taxes. An LLC can secure an Employer Identification Number or EIN by utilizing tax form SS-4 or the Application for Employer Identification Number. IRS does not require single member LLCs that have no employees and are classified as a sole proprietorship to secure EINs. However, one is needed by banks to open the account for the LLC. Likewise, some state laws may require an LLC's EIN.
When an LLC is categorized as a single proprietorship, the tax forms it has to file are the Profit or Loss from Business for Sole Proprietorship, Supplemental Income or Loss, Profit or Loss from Farming, or Income Averaging for Farmers and Fisherman, whichever is appropriate to the business. Single member LLCs with net income above $400 also need to file the tax form Schedule SE or the Self-Employed Tax.
If the LLC has employees, quarterly tax forms need to be filed regarding the salaries paid to the employees, tips received, income taxes withheld from the employees and social security and Medicare taxes. If the annual collections for social security, Medicare and tax withheld amounts to $1,000 or less, the filing and payment of taxes is only once a year.
An LLC categorized as a partnership is required to file tax form 1065 or the U.S. Return of Partnership Income. This tax form gives details of the share of the partners in the income, deductions resulting from the payment of income taxes and other tax credits accruing to the business. LLCs classified as partnerships generally pay income taxes on their share of the revenues.
When the LLC is categorized as a corporation the appropriate tax form is the U.S. Corporation Income Tax Return or Form 1120. If the LLC's members are corporations instead of individuals, the income and expenditures are reported in the tax returns of the corporation.
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About the Author
Earl Thorsen writes articles about Finances such as LLC,
Tax Form, formin an LLC and a lot more. If you would like more information about
Tax Form visit https://formbusinessllc.com
by: ethorllc11
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Date: Thu, 3 Nov 2011 -
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