Even if LLC had no business in the previous year, filing the tax return will still be necessary. Learn with us how to file taxes for LLC with no income!
One of the most popular business ownerships in the U.S. is a sole proprietorship. According to a report by the IRS in 2019, there were more than 25 of them. Lack of start up paperwork is the main reason why new business enthusiasts choose to go with this business ownership for their business ventures.
However, it has been observed that most sole proprietorships evolve into a limited liability company (LLC) formation eventually to go slightly easy on liabilities. Liability protection that comes with LLC offers a variety of benefits to its owners. But switching to LLC from sole proprietorship raises many questions as well. “Does LLC with no income have to file taxes?” being the most common one. To help you with this question, we have got you this guide that discusses the requirements and the procedure of filing taxes for an LLC with no income.
- Does an LLC with No Income Have to File Taxes?
- Why Does IRS Disregard LLC for Tax Purposes?
- How to File Requirements?
- File Requirements for LLC Partnership
- File Requirements for Dismissed Entities
- File Requirements for LLC Corporation
- Learn More About Tax Payments
- What Are the Due Dates for Tax Returns?
Does an LLC with No Income Have to File Taxes?
There are times when an LLC ends up with no expense or income through a particular year. This situation generally occurs when the LLC is new and has not started any business as of now. Or, probably the old LLC has now become inactive.
At this stage, most people are clueless if they should file the taxes with no income or not. This should be noted that even if your LLC has not started any business activity, it still requires you to file taxes.
There are certain requirements one has to go through before filing the tax for LLC.
Important Note: IRS may disregard the LLC as an entity for income tax purposes or it might be taxed as a corporation or partnership.
Why Does IRS Disregard LLC for Tax Purposes?
If the LLC has only one owner then the IRS disregards it automatically for tax purposes. The member of the LLC reports the income and expense of the LLC on his personal tax return.
On the other hand, if there are two members (or more) then the IRS considers it as a partnership. The LLC files the informational partnership tax return. Moreover, the members also need to report the expense and income of the LLC on their personal tax returns.
However, these default classifications can be modified by LLC. For example, if you want to change it from partnership to corporation then you can make amendments. To do so, LLC should file Form 8832 with the IRS.
Note: LLC can make this selection only when it is created or it may select to change the tax classification for the future date.
How to File Requirements?
To enlighten you on how to file taxes for LLC with no income, we will draw your attention to file requirements for the LCC partnership, disregarded entities, and LLC Corporation.
File Requirements for LLC Partnership
If you are wondering how to file taxes for LLC partnership with no income, learn here with us.
LLC that has been considered as a partnership is liable to the same ITR filing obligations as every other partnership. The LLC should file the informational partnership income tax return using the 1065 form even if it did not get any income throughout the year and expenses that can be claimed as credits or deductions.
This is why an LLC partnership with no income or business activity should file the federal income tax return unless there are credits or expenses that need to be claimed by the LLC.
File Requirements for Dismissed Entities
The LLC that is disregarded as a separate entity for income tax purposes is taxed as same as the sole proprietor. The income and expenses of the LLC are reported as an independent worker income for the personal tax return on Schedule C. If the LLC’s income exceeds $400 for a year then it is important to file Schedule C.
In case a member LLC does not have any business activity and expenses for deduction then this particular member does not need to file Schedule C in order to report the income of the LLC. However, in case of having other income sources, this member still needs to file a personal tax return.
In addition, the member might need to file a Schedule if there is any independent worker income from other business sources.
File Requirements for LLC Corporation
The filing requirements of LLC Corporations are quite different than partnerships or disregarded entities. It is flexible to change the tax status of your LLC. You can continue with the default option or you can choose to file LLC as an S Corporation or S Corporation.
The selection does not modify the business structure; it operates as an LLC. However, it modifies how the IRS wants you to file or pay taxes. Let’s know more about how to file taxes for LLC with no income (as a C Corporation and S Corporation).
A. Filing As a C Corporation: To file your LLC tax as a C Corporation, you need to use Form 8832 and submit it to select this with the IRS. Thereafter, you need to use Form 1120 annually for the business tax return purpose.
B. Filing As an S Corporation: For filing for S Corporation, one has to use Form 2553 with the IRS. Once done with this then submit the 1120 S form annually for the S Corporation tax return purposes. In case the S Corporation gets through the entity then it indicates that it does not pay tax itself.
Any expenses and income flow through the personal tax return which means there are more forms to complete and submit. Each owner of LLC gets Schedule K-1 that they need to report the information on Form 1040 on Schedule E. Hence, all LLC Corporations need to file an LLC Corporation income tax return despite not having any business activity or income.
These are the important filing requirements one has to follow. Remember that if your LLC did not have any income or business activity, you should understand the tax filing status of LLC and verify if your LLC tax is bound to file your federal income tax.
Learn More About Tax Payments
Now, we will discuss estimated quarterly payments, self-employment tax, and state taxes. This will help you to understand the concept of tax payments.
Estimated Quarterly Payments: According to the U.S., one should make tax payments during the year. If you follow your LLC taxes properly with the default tax status such as default single or multi-member LLC, you will have to create estimated income tax payments.
Such payments are due at different times in one year such as January, April, June, and September. Furthermore, you can create these estimated payments by filling the form 1040-ES.
Note: You need to make sure that you keep on tracking your payments as you will need to report it in the future on the income tax return.
Independent Worker Tax Payment: If you earn any income from your business activities regardless of one or more than one member in LLC, IRS expects you to pay independent contractor payment on your income. It covers 15.3% of the total tax including Social Security and Medicare taxes. You can also use Schedule SE so that you can calculate how much independent contractor tax you owe.
Besides that, if you choose to be considered as a C Corporation or S Corporation then you are not required to pay any independent contractor taxes. The corporations pay the payroll taxes themselves and these taxes will be considered as an employee’s paycheck.
State Tax Payment: Besides filing for the income tax for LLC, you also have to file taxes for your state. All you have to check for the requirements for your state such as due dates, additional fees, and what all forms need to be submitted.
In a few states, you may also have to pay filing fees annually. For instance, if creating the LLC in California is expensive then the state may request you to pay $800 as the annual filing fees. In addition, you need to pay the additional tax for the state of California if you earn more than $250,000 through your business.
What Are the Due Dates for Tax Returns?
LLC tax can be paid in different forms. For example, you can pay LLC tax as a single member, multi-member, C Corporation, or S Corporation.
Hence, there are different due dates for submitting the income tax return. It may also include different kinds of forms that need to be filled by you. Know more in the following details.
- For Single LLC Members: Schedule SE and Schedule C are due 15 April.
- For Multi LLC Member: Schedule K-1 and Form 1065 are due 15th of March. Also, Schedule SE and Schedule E can be filled by the 15th of April.
- For C Corporation: You can submit Form 1120 by the 15th of April.
- For S Corporation: Form K-1 and 1120 S can be filled by the 15th of March.
Remember that these due dates totally depend on the business when it ends on 31st of December. In case you could not get the taxes by these specified deadlines then filing an extension can be really helpful.
Note: If you ignore the due dates intentionally, it may require you to submit charges or penalties. Although you will get the extension to file taxes, it is still recommended to pay taxes by the original deadline.
Do You Receive Tax Refund?
A lot of people have this concern about whether they will get the check for the overpayment by the IRS. In the further discussion, we will discuss who all can get the tax refund.
Besides C Corporation, all the tax status gets through the entities which means if you pay the taxes, you will receive the taxes. C Corporation can only get a refund. In addition, other types of LLC filing will also get the refund check.
Can You File LLC Taxes Separately?
Filing the LLC taxes separately is totally based on the LLC tax structure. For instance, the LLC single member, S Corporation, and LLC partnership get through the entities. It justifies that any loss and profits go through your income tax return.
On other hand, if you have been considered as an S Corporation or LLC partnership then you are required to share in separate returns. It should also include the losses and income of the LLC on the Form 1040 individual income tax return.
Besides that, if you are being taxed as C Corporation then you can complete the income tax return separately including losses and income from your business that do not get through the individual tax return.
Final Verdict on Filing Tax for LLC
When you pause your business activities, a lot of people find it unreasonable to file income tax. However, it is important to file LLC taxes every year even if there is no income or activity in your business. By doing so, you can prove that your business exists.
It is also suggested to file LLC taxes if there is any business activity such as deductions, revenues, and credits. On the other hand, if there is no business activity then you can skip the federal LLC income tax return but make sure that you file the personal tax return if you earn any piece of income.
Did you miss the deadline for filing your tax for the previous years? Learn here how to file back taxes with or without record and W-2 forms.