If you own a Limited Liability Company (LLC) in Tennessee, understanding your tax obligations is essential to ensure compliance with the Internal Revenue Service (IRS) and the Tennessee Department of Revenue.
The tax return filing process depends on your LLC’s structure, whether it’s a single-member LLC, multi-member LLC, or an LLC electing to be taxed as an S Corporation or C Corporation.
In this article, we will discuss the process of IRS tax return filing for Tennessee LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
Federal Tax Filing Requirements for Tennessee LLCs
Single-Member LLCs
A Single-Member LLC (SMLLC) is an entity that is either disregarded for tax purposes or treated as a corporation if the LLC elects to be taxed as one.
The business owner is required to file the business’s income and expenses on Schedule C along with their tax return. Forms need to be completed depending on the activities of the LLC.
- Schedule SE if net earnings are over $400.
- Form 1040-ES for estimated quarterly taxes.
- Form 8829 for people claiming a home office.
Multi-Member LLCs
Multi-member LLC (MMLLC) is usually treated as a partnership regarding tax and is required to file Form 1065 U.S. Return of Partnership Income along with Schedule K-1. Schedule K-1 is given to the members to report their portion of profits or losses.
Members first file their share of this income on personal tax returns, then other probable tax responsibilities include:
- Self-Employment Tax on profits received with a Schedule K-1.
- Form 1040-ES for estimated tax payments.
LLCs Taxed as Corporations
Filing specific forms permits tax election under an S Corporation or C Corporation.
- S Corporations: File via Form 1120-S and issue Schedule K-1 for shareholders while the shareholders file their income with Form 1040.
- C Corporation: A c corp files a Form 1120 and pays income taxes at the corporate level. Shareholder distributions are taxed as dividends on shareholders’ tax returns.
Tennessee State Tax Filing Requirements
There is no state income tax in Tennessee. However, as a business owner, you are still responsible for other types of taxes:
Tennessee Franchise & Excise Tax
LLCs in Tennessee are also subject to franchise and excise taxes. These taxes are calculated in the following manner:
- Franchise Tax: The greater of (0.25% of the net worth of the entity) or (0.25% of total property owned within Tennessee), with a minimum charge of $100
- Excise Tax: 6.5% of the net earnings of the entity Annually, LLCs are required to submit an FAE 170 to the Tennessee Department of Revenue.
Tennessee Business Tax
Any LLC operating in the state is subject to Tennessee Business Tax, a state-level gross receipt tax. Classifications determine tax rates, filing requirements, and basic frequencies of payment.
Tennessee Sales Tax
Any LLC that sells any goods or services that are subject to sales tax must obtain a Tennessee Sales & Use Tax license through the Department of Revenue.
Important Deadlines
| Tax Form | Filing Deadline |
| Form 1040 (Schedule C) | April 15 |
| Form 1065 (Partnerships) | March 15 |
| Form 1120-S (S Corporations) | March 15 |
| Form 1120 (C Corporations) | April 15 |
| Tennessee Franchise & Excise Tax (FAE 170) | April 15 |
| Tennessee Business Tax | Varies by jurisdiction |
| Tennessee Sales Tax | Monthly, quarterly, or annually |
Penalties for Late Filing and Non-Compliance
Neglecting to meet tax obligations or filing taxes late may result in penalties which include:
Overdue Penalties: For Form 1065 and Form 1120, the IRS charges late filing penalties that range from $210 to $435 per shareholder/partner per month.
Tennessee State Penalties: When excise and franchise taxes are not paid on time, a 5% penalty is charged for every month and the maximum chargeable penalty per month is capped at 25%.
Interest Construction: Unpaid taxes not only incur these penalties but also incur an interest charge set by the relevant authorities for the Tennessee Department of Revenue Junior.
Make sure you do not incur these penalties by making sure that all payments are issued within the stipulated time frame.
How to File Your Tennessee LLC Tax Return
Identify whether your LLC is a multi-member LLC single-member LLC, or a corporation that elected to be taxed as a LLC.
Collect all records of finances including bank statements profit and loss statements, and purchase receipts.
Prepare all required federal forms and submit them to the IRS.
Submit state taxpayers’ methods including franchise taxes, business taxes, excise taxes, and other filings which may apply.
If you meet certain requirements, then you can pay estimated taxes to avoid penalties.
Prevent failure to comply by meeting the record’s requirements and timelines set in the future.
How EasyFiling Can Help File Tax for Tennessee LLC
Taxes for your LLC in Tennessee can be challenging due to the federal and state requirements. EasyFiling makes it simple by providing:
- Specialized tax preparation services for LLCs
- Automated bookkeeping and financial monitoring
- Compliance assistance and timely reminders
- Support for multi-member LLCs and corporate-taxed LLCs
With EasyBooks from EasyFiling, you can ensure accuracy and compliance while taking advantage of maximizing benefits. Visit EasyFiling for more information.
Conclusion
LLCs in Tennessee are obligated to pay both federal and state taxes. If you operate an LLC, multi-member LLC, or an LLC taxed as a corporation, you should understand the IRS and Tennessee state tax requirements to ensure compliance.
If you are looking for help filing tax returns, consulting a professional accountant, or using EasyBooks from EasyFiling for hassle-free bookkeeping and tax returns preparation can ease the stress.
Visit EasyFiling.us for more information to make filing taxes for your LLC easier.
Frequently Asked Questions (FAQs)
1. Does a Tennessee LLC have to pay state income tax?
No, an individual income tax is not collected in Tennessee, however, an LLC has to pay franchise and excise taxes.
2. What happens if I do not file a tax return for my LLC in Tennessee on time?
Losing track of deadlines may incur penalties, fines, and even earning interest from both the IRS and the state. Make sure to file your taxes as soon as possible or apply for an extension.
3. Who can elect S-corporation status for a Tennessee LLC?
A Tennessee LLC can either submit Form 2553 to the IRS or have it done through a third-party agent, in which case it becomes an S Corporation. This form is filed with the goal of saving money on taxes.
4. Is there a need to obtain an EIN for a Tennessee LLC?
Yes, an Employer Identification Number (EIN) is necessary if your LLC has more than one member or has employees.
5. How do I file the franchise and excise taxes for Tennessee?
Form FAE 170 has to be submitted electronically via the Tennessee Department of Revenue online portal.
Nabin Adhikari
