IRS Tax Return Filing for New Jersey LLC Owners

If you own a limited liability company (LLC) in New Jersey, it is important to know how to file your IRS tax return.

Your tax responsibilities will vary depending on how your LLC is structured and taxed. Meeting federal and state tax requirements is necessary to avoid penalties and caps on your business’ potential.

In this article, we will discuss the process of IRS tax return filing for New Jersey LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.

Understanding New Jersey LLC Taxation

All New Jersey LLCs must meet federal tax requirements and also the requirements put in place by the State of New Jersey.

LLCs are treated by default by the IRS as pass-through entities, meaning any income made and associated tax liabilities are reported to the owner directly. LLCs have the option to be taxed like corporations as well.

There are three main approaches to taxing LLCs based on their classification:

• A Single-Member LLC is considered a disregarded entity which means the owner reports the income and expenses on a personal tax return.
• Multi-member LLCs are treated like default partnerships, which means they need to file a partnership return and also report their income individually.
• LLCs that elect to be taxed as S Corporations lose the tax liability at the corporate level but bear the burden of additional IRS restrictions.
• LLCs that elect to be taxed as a C corporation pay corporate income tax and must file an entity tax return.

These divisions impact tax obligations, which differ for each class of entity type; therefore, these classifications must be understood thoroughly while preparing various filings.

Federal Tax Filing Requirements for New Jersey LLCs

1. Single-Member LLC Tax Filing

Because a Single Member LLC is a disregarded entity, its tax income and expenses are reported on its owner’s tax return. These are the required forms:

• Schedule C (Profit or Loss from Business): Attached to the owner’s Form 1040 to report all business income and expenses.
• Schedule SE (Self-Employment Tax): Required for calculating Social Security and Medicare taxes owed on the business’s net income.
• Schedule E (Supplemental Income and Loss): Used if the LLC generates rental income or investment income.
• Schedule F (Profit or Loss from Farming): Required for LLCs engaged in agricultural activities.

2. Multi-Member LLC Tax Filing

Multi-member LLCs must complete additional tax forms because these types of businesses are, by default, treated as partnerships.

• Form 1065(the partnership tax return): This captures the total income, deductions, and credits of the LLC.
• Schedule K-1: Each member receives this showing their share of income that must be included in their tax returns.
• Form 1040 (Individual Income Tax Return): Members include their Schedule K-1 income on their tax returns.

3. S Corporation Election Tax Filing

An S Corporation LLC pays tax at the corporate level, but first passes income through to its members on a separate corporate return:

• Form 1120-S (U.S. Income Tax Return for an S Corporation): The business reports gross income, expenses, and taxes paid.
• Schedule K-1 (Shareholder’s Share of Income, Deductions, and Credits): Reported for individual owners so they may file their taxes.
• In addition, Owners must file Form 1040 and remit any self-employment taxes due.

4. C Corporation Election Tax Filing

An LLC that elects C taxation is required to file the corporate tax returns separately.

• Form 1120 (U.S. Corporation Income Tax Return): Used to report revenues and expenditures of the corporation.
• The business is subject to corporate taxation at profit and dividends are paid to the owners as individuals, hence already subject to double taxation.

Important Tax Documents for New Jersey LLC Owners

While filing taxes, owners of New Jersey LLCs are required to collect some important documents such as:

IRS Forms: These include documents like Form 1040, Schedule C, Form 1065, and Form 1120-S, which depend on the tax classification.

Financial Statements: These include profit and loss statements, balance sheets, cash flow statements, etc.

Payroll Records: Detailed payroll reports should be kept over if your LLC has employees.

Receipts and Invoices: Documents that can be used to obtain tax credits or deductions.

Bank Statements: These are used to ascertain business income and expenses.

New Jersey State Tax Filing Requirements

LLCs operating in New Jersey have some additional imposed tax requirements, which are:

New Jersey Gross Income Tax: Every member of the LLC shares is required to include their portion of business income for the year when filing taxes.

Corporation Business Tax (CBT): For LLCs that opted to be C Corporations or if the company meets the state’s minimum tax limits.

Sales and Use Tax: If the LLC is in the business of selling taxable goods or services, they are required to collect and remit sales tax to the state.

Employer Taxes: If the LLC has any employees, they are required to register for the deduction and submission of payroll taxes, which include, but are not limited to unemployment and disability contributions.

Important IRS Tax Deadlines for New Jersey LLCs

Meeting tax deadlines is essential to avoid penalties. Below are the key IRS deadlines for New Jersey LLC owners:

Extensions are available by filing Form 7004 before the deadline.

Common Tax Deductions for New Jersey LLCs

The owners of an LLC based in New Jersey are eligible to claim multiple deductions during tax season thereby lowering their taxable income. Most common deductions include the following:

Home Office Deduction: If your business has a dedicated space in your house, you can claim a portion of your rent or mortgage payment.

Business Travel Expenses: These encompass travel expenditures as well as associated costs for travel accommodations and food.

Office Supplies and Equipment: Business use of personal computers, office furniture, and software can be claimed.

Marketing and Advertising Costs: These are expenses related to the expansion of your business, for example, website construction, digital advertisement, and printing materials.

Professional Services Fees: The fees paid to accountants and business consultants or attorneys regarding your business are claimed here.

Employee Wages and Benefits: These include costs related to payment of employees, health coverage, and contributions to retirement plans.

Penalties for Late Filing

Taxes filed late can lead to consequences such as:

• A penalty for Non-Filing which is 5% of the amount due for every month, stackable up to 25%.
• A penalty for Non-Payment which is 0.5% for every month the amount is outstanding.
• Late Tax Payment brings interest penalties that are compounded daily until the full outstanding tax is paid.

Other Penalties: Depending on the jurisdiction, New Jersey state tax penalties require additional fines or overdue payment interest, on top of other delays already incurred.

Steps to File Your New Jersey LLC Tax Return

Collect All Financial Documents: Throughout the year, keep every income, expense, receipt, and invoice in an orderly manner.

Determine Your LLC’s Tax Status: Verify whether your LLC is a sole proprietorship, partnership, S corporation, or C corporation for tax filing purposes.

Fill Out Federal Tax Documents: Based on the LLC activities, appropriate forms must be submitted, with payments reflecting the reported earnings.

File taxes with the state of New Jersey: All necessary filings for the state including gross income tax and corporate business tax filings must be done.

Make Tax Payments: Quarterly payments must be made or underpayment of taxes can be the result.

Keep Documentation: Maintain all tax filings, receipts, and financial statements for at least three years in case of audits.

How Easyfiling Can Help File Taxes for New Jersey LLCs

Easyfiling offers a complete range of tax filing services to LLC owners in New Jersey. Some of our services include:

Professional Assistance: One-on-one assistance to help LLC owners resolve issues concerning tax classifications and filing responsibilities.

Accurate Preparation of Tax Returns: Making sure that all necessary federal and state tax forms, as well as any other required forms, are completed and submitted promptly.

Compliance Support Services: Assisting businesses with federal and state tax compliance in New Jersey.

Bookkeeping and Record-Keeping: Keeping files throughout the year to ensure that no documents are missing when filing tax returns.

Frequently Asked Questions (FAQs)

1. Is a Federal Tax Return Required from a New Jersey LLC?

Yes, all LLCs are required by the IRS to file a tax return, although the form submitted is based on the LLC’s tax classification:

• Single Member LLCs: These need to file Schedule C (Form 1040) as a disregarded entity.
• Multi-Member LLCs: These will file Form 1065 (Partnership Return) and will issue Schedule K-1 to members.
• LLCs Electing as an S-Corp: They will file Form 1120-S and will issue a Schedule K-1 to the owners.
• LLCs Electing as a C-Corp: These need to file Form 1120 with the corporation.

2. What Taxes Does a New Jersey LLC Have To Pay?

Other than federal obligations, an LLC is likely liable for the following:

• Corporate Business Tax (if the LLC has New Jersey-source income)
• LLC Annual Report Fee ($75 each year)
• New Jersey Gross Income Tax (only if the LLC opts to be taxed like a corporation)

3. What Is the Deadline For Paying Taxes for New Jersey LLCs?

• Single Member LLCs: April 15 (matches with individual tax returns)
• Multi-Member LLCs (Partnerships): March 15 (Form 1065)
• S Corporations: March 15 (Form 1120-S)
• C Corporations: April 15 (Form 1120)

4. What Other New Jersey Tax Compliance Obligations Exist for Other LLCs?

Yes, New Jersey imposes a filing requirement to get a tax ID with the NJ Division of Taxation for LLCs with income in the state and also file the corresponding business tax return. Plus, some LLCs are subject to the NJ Minimum Business Tax if they choose to be taxed as a corporation.

5. Does a New Jersey Foreign-Owned LLC Need to File Form 5472?

Yes, if a foreign person holds more than 25% of a Single-Member LLC, the LLC must file Form 5472 and pro forma Form 1120 to report the transactions conducted with the foreign owners.