Paying taxes for your LLC in Wisconsin is vital to remaining compliant with the IRS and state regulations.
Whether your LLC consists of only a single member or multiple members, knowing the tax filing requirements can help you avoid penalties and reap the maximum benefits.
In this article, we will discuss the process of IRS tax return filing for Wisconsin LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
Understanding Wisconsin LLC Taxation
Default taxation of Wisconsin LLCs is “pass-through” entities which means that the business itself does not pay any federal income tax.
Profits as well as losses flow through to the owners who in turn have to report the profits and losses in their tax returns. Nevertheless, if the structure is suitable for their business, LLCs may opt to be taxed as corporations.
Single-Member LLC Taxation
A single-member LLC (SMLLC) is treated as a disregarded entity for tax purposes, meaning,
- The owner has to declare both business income and expenses in Schedule C of the personal Form 1040.
- The self-employment tax on the net income of the LLC is applicable. This in turn covers Social security and Medicare taxes.
- Substantial profits of the LLC may require estimated tax payments for the quarter.
- If the LLC brings employees on board, the owner is responsible for payroll taxes which include Form 941 for quarterly federal tax returns.
- Single-member LLCs are still required to consider and document expenses, including deductions for home office, driving business-related mileage, and depreciation.
Multi-Member LLC Taxation
Unless a multi-member LLC opts for corporate taxation, they are treated as a partnership. Some Quick Points:
- The LLC has to file Form 1065 (U.S. Return of Partnership Income) to declare income and expenditures.
- Each member gets a Schedule K-1 outlining their share of profits and losses for their tax filings.
- Members might be subject to self-employment tax depending on their portion of net earnings, thus tax strategizing is important.
- Every partnership is required to have an operational agreement defining responsibilities, ownership shares, and tax responsibilities that is thorough and structured.
- Multi-member LLCs have a larger scope of expenses that can be claimed as deductions, like salaries, professional services, and business insurance.
LLCs Electing Corporate Taxation
LLC can opt to be taxed with S Corporation (Form 1120-S) or C Corporation (1120):
S Corporation:
- Owners may file through Form 1120-S and pass profits to both owners and remaining shareholders through Schedule K-1.
- To lessen self-employed taxes, S-corps enable members to pay themselves a wage while distributing other profits as dividends.
- An LLC needs to meet the IRS`s qualifications like total shareholders being less than 100 to be eligible.
C Corporation:
- The LLC opts to pay corporate taxes federally by filing Form 1120.
- The Owners have to pay taxes on the dividends that are distributed, creating the possibility of double taxation.
- Larger businesses hoping to reinvest their profits or raise outside funding find C-corporations to be more suitable.
Wisconsin State Tax Requirements
Wisconsin defines other tax obligations for the LLCs registered within the state:
Franchise Tax: Wisconsin’s franchise tax has to be paid by LLCs opting for corporate taxation.
State Income Tax: LLC members file earnings on a Wisconsin state income tax return, Form 1.
Sales and Use Tax: LLCs selling taxable goods or services are required to apply for a Wisconsin sales tax permit and submit sales tax returns.
Withholding Tax: An LLC with employees is required to withhold state income tax from the wages and pay it to relevant authorities.
Excise Taxes: LLCs dealing in specific alcohol, fuel, or tobacco products could be further chargeable by Excise tax.
Federal Tax Return Filing Deadlines
To remain clear of IRS penalties, LLCs should stick to these deadlines:
March 15: Form 1065 (Multi-member LLCs) or 1120-S (S corporations) need to be submitted.
April 15: 1040 (Single member LLC owners) or 1120 (C corporations) need to be filed.
Due Dates for Quarterly Estimated Taxes: April 15, June 15, September 15, and January 15.
Payroll Tax Deposits: For an LLC with employees, payroll taxes are mandated to be deposited every two weeks or every month depending on the payroll tax liability of the business.
Wisconsin State Tax Deadlines
April 15: The notice of Wisconsin state income tax return for individual members of the LLC is due.
Quarterly Estimated Taxes: If necessary, due dates follow that of the federal deadline.
Sales Tax Returns: Due on a monthly basis, quarterly, or yearly due to varying levels of revenue from the business.
Annual Report Filing: A Wisconsin LLC must file an annual report with the Department of Financial Institutions to keep the LLC in good standing.
Penalties for Late Filing and Non-Compliance
Tax returns have to be filed on time and deadlines must be followed to avoid penalties:
Late Filing Penalty: Failing to file Form 1065 on time attracts a penalty of $210 for each partner for each month from the IRS.
Late Payment Penalty: Levying a due if it is not paid on time attracts interest which grows under a rate defined by IRS.
State Penalties: Wisconsin gains the power to apply additional fines either for not filing in time, underestimating the payment, or not meeting the state-controlled tax legislation.
Audit Risks: Incorrect reporting of tax could effectively raise the chance of an audit from the IRS, leading to further costs and owing back taxes.
Additional Tax Considerations for Wisconsin LLCs
Employer Taxes: For LLCs with employees, you are responsible for withholding and paying payroll taxes, including unemployment insurance tax.
Self-Employment Tax: Unless an S-corp election is made, all LLC members are subject to self-employment taxes of 15.3% for self-employment income.
Deductions and Credits: Small business federal tax credits as well as business expense deductions for rent, advertising, and equipment may be available.
Local Taxes: It is important to verify local regulations since certain Wisconsin counties and cities may levy additional business taxes.
Record-Keeping Requirements: As a general rule, the IRS suggests keeping all financial records relevant to revenues and costs for a minimum of three years for LLCs.
How to File Your Wisconsin LLC Tax Returns
Gather Financial Records: By having accurate bookkeeping during the year, you can gather income statements, expenses, and payroll documents during the year.
Choose the Correct Forms: Determine if you are required to fill out 1040 (Schedule C), 1065, 1120, or 1120-S.
Use Tax Software Or A CPA: Professional help may be useful so that you do not make mistakes and miss potential deductions.
File Before The Deadline: As long as you eFile or send in your paper-filed returns before the deadline, your returns will be accepted.
Pay Taxes Owed: To avoid incurring interest charges and IRS penalties, ensure that payments for both state and federal taxes are remitted on schedule.
How EasyFiling Can Help Wisconsin LLC Owners
The process of filing taxes for your Wisconsin LLC can be complicated; however, with EasyFiling, it becomes effortless. Here’s how we can help you:
- LLC Tax Filing Services: For multi-member and single-member LLCs, we take care of the federal and state tax returns.
- Quarterly Estimated Tax Calculations: You can avoid penalties by making sure you pay the estimated taxes due for the year.
- Payroll Tax Compliance: We help in setting up payroll systems and accurate tax withholding and filing.
- Deductions Optimization: Our experts help you with expenses so that your overall tax burden is lowered.
- IRS & Wisconsin Filings: We assure you that your tax returns as well as annual reports are filed precisely and on time.
- Audit Support and Compliance Checks: We offer support and review services for compliance with IRS tax obligations.
Instead of worrying about the tedious details of tax filing, you can spend your time growing your business. Reach out today to get started with EasyFiling!
Final Thoughts
Knowing what is required to file taxes for your Wisconsin LLC helps ensure compliance and avoid unnecessary fees.
If you are filing taxes as a single member or multi-member or as an elected corporation, staying on top of everything is of utmost importance.
If you’re looking for qualified help, think about contacting a tax expert or utilizing an LLC tax service such as EasyFiling, which offers assistance with taxes and guarantees there’s no violation of IRS and Wisconsin state policies.
Frequently Asked Questions (FAQs)
What is the tax treatment of my Wisconsin LLC at the federal level?
Single-member LLCs are, by default, taxed like sole proprietorships (they file Schedule C with Form 1040) whereas multi-member LLCs are taxed like partnerships (they file Form 1065). An LLC can also choose to be taxed like an S Corporation (1120-S) or a C Corporation (1120).
Do I have to submit a different tax return for my LLC at the Wisconsin state level?
In Wisconsin, there’s no requirement for pass-through LLCs to file a separate state tax return unless they choose corporate taxation. However, all members are required to report the LLC income on their personal state tax returns, which includes Form 1.
Am I required to pay self-employment taxes for my LLC?
If S Corporation taxation is not chosen, then yes. All members of an LLC need to pay self-employment tax (15.3%), which is split between Social Security and Medicare.
Do I need to file an annual report for my Wisconsin LLC?
Definitely, every LLC in Wisconsin needs to report on their status to the Department of Financial Institutions every year. This is in order to stay compliant with state regulations.
Is my Wisconsin LLC required to collect and submit sales tax?
If your LLC’s line of business includes selling taxable tangible items or services in Wisconsin, then you must obtain a WDOR sales tax license and file either monthly, quarterly, or annual sales tax returns, depending on your sales volume.
Nabin Adhikari
