If you have an Arkansas Limited Liability Company (LLC), you must comply with the IRS guidelines for tax return submissions.
Your federal tax responsibilities will depend on your business structure and ownership type, whether you are a single-member LLC, multi-member LLC, or even a foreign-owned LLC.
In this article, we will discuss the process of IRS tax return filing for Arkansas LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
How does the IRS tax Arkansas LLCs?
There is no particular tax classification set aside for an LLC by the IRS. Taxation instead relies on the type of structure the LLC has, and if any elections have been made for tax classification purposes.
Arkansas LLCs can be taxed as sole proprietors, partnerships, or corporations. The default treatment set by the IRS is based on the number of members:
Single-Member LLC: The Default treatment is that of a disregarded entity. The owner will detail income and expenses on Schedule C of Form 1040, and might also need to submit other forms like Schedule SE.
Multi-Member LLC: Treatment as a partnership is the default. An LLC is required to file Form 1065 and provide K-1s to every member. The income will then be reported by all members on their tax returns.
LLC Electing to Be Taxed as a Corporation: An LLC may choose to be taxed as a business through a C Corporation or S Corporation by filing Form 8832 and Form 2553, respectively. C corporations pay taxes with Form 1120, while S corporations use Form 1120-S.
Foreign-Owned Single-Member LLC: It is required to file Form 5472 paired with a Pro Forma Form 1120 for disclosing reportable transactions with foreign shareholders. This structure also mandates the LLC to have an EIN.
IRS Tax Return Filing Requirements for Arkansas LLCs
1. Single-Member LLC
If your LLC for Arkansas’s Single Member has only one owner who happens to be a U.S. resident, it is regarded as a disregarded entity for the single reason that the LLC’s owner’s income is filed under a personal tax return:
- Forms To Be Filed: A Schedule C (Form 1040) needs to be filed along with SE if self-employed, otherwise known as self-employment income.
- Due Date: Every 15th day of April or the next working day if a weekend or holiday falls midweek.
Additional Notes: Other schedules may be necessary depending on the type of income or deductions claimed
2. Multi-Member LLC
An Arkansas LLC with multiple members will, by default, be classified as a taxed partnership. An LLC does not pay an income tax, however, the LLC is required to file an information return.
- Forms To Be Filed: A 1065 form, partnered with U.S. Return of Partnership Income.
- Due Date: March 15th For Every Year. The deadline has not been changed.
Additional Remarks: Every member of the LLC has to receive a Schedule K-1 detailing the share of income, all of the deductibles along with credits of the LLC’s income. Each member using this information seems to file individually and get through their tax returns.
3. LLC Corporation Taxation
An Arkansas LLC treated as a corporation needs to follow corporate tax filing guidelines if it opted to be taxed as a corporation.
- Form to File: Form 1120 for C-Corporations or Form 1120-S for S-Corporations
- Due Date: April 15 (C-Corp) or March 15 (S-Corp)
- Election Forms: Form 8832 for C-Corp election or Form 2553 for S-Corp election
Additional Considerations: Corporate tax rates, double taxation (C-Corp), and shareholder reporting obligations (S-Corp)
4. Single-Member Foreign-Owned LLC
LLCs whose owners are foreign nationals or companies come with added transparency requirements for the IRS.
- Form to File: Form 5472 along with a Pro Forma Form 1120
- Deadline: April 15.
- EIN Specifics: Shall have an EIN for filing and banking purposes
Other: Keep adequate records for every transaction carried out between the LLC and its foreign owner. Non-compliance comes with harsh penalties.
Arkansas State Taxes for LLCs
Aside from IRS requirements, Arkansas LLCs have state obligations to comply with. These obligations depend on the nature of the business activities:
Franchise Tax: All Registered LLCs in Arkansas must file annually and pay the franchise tax to the Arkansas Secretary of State. Noncompliance may lead to fines and administrative dissolution.
State Income Tax: The State of Arkansas taxes income generated by LLCs as individual or corporate tax returns. If the LLC is taxed as a pass-through entity, the income is reported on the owners’ personal state income tax return.
Sales Tax: When engaging in retail activities or providing taxable services within Arkansas, your LLC is required to collect and pay sales taxes.
Tax Filing Deadlines
Arkansas LLCs must comply with established filing dates to avoid penalties and remain in good standing with the state of Arkansas and the IRS. Keep the following dates in mind:
Single-Member LLC (U.S. Resident Owner): Tax returns are due by April 15, or the next working day if this day falls on a weekend or holiday.
Multi-Member LLCs: File Form 1065 by March 15 and provide Schedule K-1s to each member.
LLC Taxed as a Corporation: C-Corp tax returns, 15th April; S-Corp returns, 15th March.
Foreign-Owned Single-Member LLC: 5472 is due by 15th April.
State Franchise Tax: The Arkansas franchise tax is due on May 1st.
Make sure you have recorded all franchise tax deadlines to ensure you do not incur any penalties or interest charges.
Late Filing Penalties
These self-imposed taxing deadlines can serve as costly penalties, and the IRS itself makes ensuring surrendering these deadlines an expensive ordeal. It is crucial to understand these consequences:
Filing Form 1065 passes per the deadline is a penalty equal to $220 multiplied by every LLC Holder every month, surmounting to a maximum of 12 months. Regardless of tax obligations, the penalty applies.
Filing Form 5472 with, 25,000 penalty per form, passing these penalties leads to surrendering greater fines.
Filing Form 1120/1120-S also comes with a free 5% each month unpayable surmountable up to 25% of say surrender tax payments. Addon obligations of late payment taxes and interest might incur.
Tips to Stay Compliant
LLCs in Arkansas and other states should note the following tips to mitigate any issues or penalties:
Organized Documentation: Ensure that all business transactions, such as tax filings, receipts, invoices, and even bank statements, are up to date and meticulously managed.
Set Calendar Alerts: Avoid missing any deadlines by marking calendar alerts for Arkansas’s State tax and IRS deadlines.
Consult Professionals: Include proficient team members such as tax advisors or CPAs who can tackle problematic and intricate forms and tax rules.
Financial Software: Make use of financial software for better management of day to day bookkeeping as well as preparation for the upcoming tax season.
Let EasyFiling Help with Your Tax Filings
We at EasyFiling focus on assisting Arkansas LLC proprietors with their federal and state tax obligations. Our staff is available to assist you with obtaining an EIN, filing IRS forms 5472, 1065, or 1120, maintaining your financial records, and more.
Do you require assistance with your Arkansas LLC tax return? Reach out to EasyFiling today to help your business remain compliant with IRS and state filing stipulations.
Frequently Asked Questions (FAQs)
What measures should I take to avoid penalties for late filing?
To avoid penalties, the most effective practice is the timely filing of tax returns. If need be, enlist the help of a tax professional.
Is dual filing for federal and state taxes necessary?
The federal and state taxes need to be filed for Arkansas LLC owners. Nebraska LLCs will have to pay Franchise Tax, Income Tax, and possibly other taxes as well.
What are the risks of missing the filing deadline?
You’ll incur serious consequences if this happens, quite likely including additional fees and interest on outstanding taxes. It’s always best to submit your application at the earliest opportunity to limit any penalties you may incur
Swostika Silwal
