Staying informed on tax filing requirements is critical for IRS compliance if you own a Washington LLC.
The Washington LLC taxes depend on its classification such as single-member LLC, multi-member LLC, or LLC that chose to be taxed as S or C Corporations.
In this article, we will discuss the process of IRS tax return filing for Washington LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
Federal Tax Obligations for Washington LLCs
Single-Member LLC Taxation
A Single Member Limited Liability Company is filed by the business owner alongside their income taxes, as an entity that is ignored by the IRS.
The sole proprietor must report their revenue and spending through Schedule C (Form 1040) using profit and loss categorization meant for self-employment.
Should the SMLLC specify tax obligations or require staff members, then additional supplementary documents will be provided:
- Schedule C (Profit Or Loss From a Business)
- Schedule SE Self-Employment Tax
- Form 1040 U.S Individual Tax Return
- Form 1099 NEC Contractors Not Employees (Provided During Payment Have Independent Contractors)
- Form 941 Or 940 (If The Firm Has Staff)
Multi-Member LLC Taxation
As a default, the multi-member LLC is taxed based on a partnership basis which will require LLCs to undertake issuing returns of partnership income by submitting Form 1065.
All partners obtain a K-1 tax schedule which allocates in computing personal income tax returns based on allocated deductions or profit shares.
Important IRS documents for multi-member LLCs are:
- Form 1065 (Partnership Tax Return)
- Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.)
- Form 1040 with Schedule E (Supplemental Income and Loss)
LLC Taxed as an S Corporation
Form 2553 can be filed with the IRS to allow Washington LLCs to be taxed as an S Corporation. Owners can receive a portion of their earnings as a salary and the remainder as distributions which is beneficial because it lowers self-employment taxes. The following documents need to be submitted:
- Form 1120-S (U.S. Income Tax Return for an S Corporation)
- Schedule K-1 (For Each Shareholder’s Share of Income)
- Form 941/940 (For Payroll Taxes, If Employees Are Present)
LLC Taxed as a C Corporation
If a Washington LLC files Form 8832, it is taxed as a C Corporation. The business must submit a separate payment for corporation income tax at a national level and need to complete Form 1120 (U.S. Corporation Income Tax Return).
Important IRS forms relevant to LLCs electing C corporation status:
- Form 1120 (C Corporation Tax Return)
- Form 1099-DIV (If Dividend Payments are Made to Shareholders)
- Form 941/940 (For Payroll Related Taxes; If There Are Employees)
Washington State Tax Responsibilities
Washington is among a handful of states with no personal or corporate income tax. Still, LLCs doing business in Washington are liable for some state taxes like:
- Business and Operating (B&O) Tax: In Washington, there is a gross receipt tax imposed on businesses depending on specific sectors.
- Sales and Use Tax: If your LLC sells goods and services that are subject to taxation, you are required to collect and pay sales tax to the Washington Department of Revenue.
- Excise Taxes: Some businesses, for example, those dealing in tobacco or fuel, may have additional excise taxes imposed.
Key IRS Filing Deadlines for Washington LLCs
Annual Federal Tax Deadlines:
- Single Member LLCs: Every 15th of April (Form 1040 shot of an Individual’s Income Tax Return)
- Multi-member LLCs: The 15th of March (The Partnership Return Form 1065)
- LLC Taxed S Corporation: The 15th of March (Form1120 sole for Subchapter S)
- LLC Taxed C Corporation: 15th Start of April (Form 1120)
Washington State Tax Deadlines:
- B&O Tax: subjected to quarterly or yearly declarations analyzing returns.
- Sales tax: likened to sets, quarterly or yearly, with aspirations based on revenue).
Common Tax Deductions for Washington LLCs
To decrease your taxable income, take full advantage of the deductions available. Some expenses that may be claimed by LLC owners in Washington include the following:
- All costs related to running a business. These may include rent, utilities, business supplies, and software
- Expenses related to business promotion and advertising
- Wages paid to employees and payments to freelance contractors
- Insurance costs related to the business
- Business travel expenses and automobile expenses, if applicable
- Contributions to employee retirement plans
Penalties for Late Filing and Non-Compliance
Not filing returns for your LLC taxes or failing to pay for an extended period can result in some form of penalty in addition to interest. Here are some of the most well-known ones:
Failure to file will incur a penalty: This will be 5% per month of the unpaid taxes for a maximum of 25% in addition to the overall tax due.
Failure to Pay Penalty: 0.5% of the unpaid tax per month, up to 25% of the total amount due.
Late Payment Interest: Interest accrues daily on unpaid taxes, based on IRS rates.
Failure to Provide Schedule K-1 (for Partnerships and S Corps): A penalty of $210 per partner/shareholder per month, up to 12 months.
How to File Your Washington LLC Taxes
Determine Your Tax Classification: Ensure that your LLC is not being taxed as a disregarded entity, partnership, or as an S or C corporation.
Accurate bookkeeping is needed to track income, expenses, employee wages, and any other important company deductions to maintain proper Reports of Financial Activity.
Upload Required Federal Forms: Fill in and submit the relevant forms to the IRS according to the structure of your LLC.
Pay Federal Estimated Taxes: If there’s taxable income for your LLC, make the IRS’s quarterly estimated tax payment.
File State Taxes: If applicable, register for B&O and sales tax then remit payments to the Washington Department of Revenue.
How EasyFiling Can Help File Taxes for Washington LLC
Meeting state and federal tax filing requirements is not always straightforward. Our team at EasyFiling will guide you through the process by providing professional tax preparation, bookkeeping, and compliance services. These include:
- Tax Form Filing: All required forms will be filled in and submitted on time, every time.
- Bookkeeping Services: Organize your financial documents to lower the burden of taxes.
- Estimated Tax Payments: Send in correctly calculated quarterly tax payments to reduce IRS penalties.
- State Compliance: Help with B&O tax, sales tax in Washington, and other requirements.
With EasyFiling, LLC owners in Washington can concentrate on building their business while complying with IRS and state tax requirements.
Conclusion
Tax filing for Washington LLCs will depend on the tax classification and the activities the entity engages in for income generation.
While there is no state income tax for Washington, LLCs need to meet federal IRS tax obligations alongside state business taxes. Maintaining proper bookkeeping ensures compliance and reduces the risk of penalties.
For those requiring aid with tax preparation, consulting a tax expert or utilizing services from EasyFiling’s EasyBooks can help.
Frequently Asked Questions (FAQs)
1. Is there a need for an LLC in Washington to file a state income tax return?
No, Washington does not file a state income tax, thus there is no state income tax return for LLCs. However, they are required to follow the federal taxation rules and state-level business taxes.
2. What are the repercussions of not filing a Washington LLC tax return in time?
Not filing in time may incur penalties along with interest charges. IRS applies a failure to file fee of five percent each month for not fulfilling the tax requirement, up to a total of 25 percent of the unpaid tax.
3. Is it possible for my Washington LLC to be taxed like an S Corporation?
A Washington LLC can indeed elect S Corporation status with the IRS using Form 2553. Doing so may decrease self-employment tax payments, thereby offering certain benefits.
4. As a Washington LLC owner, how do I pay self-employment taxes?
A single-member LLC owner, as well as a partner of a multi-member LLC, is required to pay self-employment taxes based on their portion of the business profits. This is completed through filing a Schedule SE along with Form 1040.
5. What would a Washington LLC have as tax deductions?
Some of the common deductions include: marketing costs, business expenditures, salaries, travel expenses, and retirement contributions. Proper record-keeping guarantees these deductions will be maximized.
Nabin Adhikari
