Setting up an LLC in Minnesota has many advantages, including flexible taxation and liability protection.
In addition, your LLC must stay in good standing by following the prescribed rules and regulations, such as filing an annual tax return with the IRS.
In this article, we will discuss the process of IRS tax return filing for Minnesota LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
Understanding LLC Taxation in Minnesota
Almost all LLCs are classified as pass-through entities by default. In layman’s terms, it means that income, deductions, and credits pass through the business to the members or owners.
In addition, LLCs have the option to elect taxation as either a corporation or an S corporation, which comes with its own set of requirements in terms of filing. How your LLC is taxed in Minnesota is dependent on how the LLC is structured for tax purposes.
Single-Member LLC (SMLLC)
A single-member LLC is exclusively regarded by the IRS as a pass-through entity for taxation purposes.
This simply implies that the income, deductions, and credits of the LLC are passed on to the owner and are reported via the owner’s tax return, which is Form 1040 and Schedule C forms.
Multi-Member LLC
A Multi-Member LLC is considered a partnership for tax purposes. The members themselves are responsible for reporting taxes, and the LLC does not pay taxes directly.
The members report all the LLC’s income, losses, and expenses through Form 1065 and receive a K-1 schedule detailing their portion of dividends sent to the LLC.
LLC Electing to be taxed as an S Corporation
Any LLC can, at its discretion, elect to be taxed as an S Corporation by filing Form 2553 and sending it to the IRS.
Provided the request is granted, the LLC proceeds to fill in Form 1120S and gives K-1 schedules to the shareholders.
This helps limit the self-employment taxes that the owners of the LLC can be taxed on for the LLC’s income.
LLC Electing to be taxed as a C Corporation
An LLC can also become a C Corporation after filing out and sending Form 8832 to the IRS.
In this scenario, the LLC will fill out and submit Form 1120 whilst also paying the standard tax corporations have to pay on their net income.
Minnesota LLC Owners’ Filing Obligations
The Internal Revenue Service (IRS) requires all business owners to file a tax return regardless of the entity type. However, depending on the other classifications, you might be legally obliged to file different forms alongside your tax return.
Each LLC owner category will require submission of a relevant form; the options include:
- A single-member LLC will need to file Form 1040 alongside Schedule C, reporting income and expenses relating to the business.
- For a multi-member LLC, it will incur Form 1065 with Schedule K-1 for each member of the LLC.
- For S corporation election, the required form is Form 1120S alongside Schedule K-1.
- For a C corporation, election required form is Form 1120
Deadline for Tax Filing
It is essential to know the deadline for filing taxes, as these tend to change periodically, especially in the United States. The estimated date for LLC filing taxes, divided according to classification and tax year, is provided below:
- For a single-member LLC, the form is due by the 15th of April.
- Filing for a multi-member LLC is due by the 15th of March.
- For an S corporation, 1120s is due by the 15th of March.
- And for the C corporation, Form 1120 is due by the 15th of April.
If your LLC’s tax year closes on a date other than December 31st, the deadline for filing taxes may differ, and you can also apply for an extension on any of these forms.
Minnesota State Tax Filing
Minnesota Federal tax filing does not change for LLC owners, but it is statewide. Minnesota also has Franchise Tax and LLC Income Tax, which include more state forms.
Depending on how your LLC elects to be taxed, you may have to deal with these forms:
- Minnesota Individual Income Tax (Form M1): Single-member LLCs
- Minnesota Partnership Income Tax (Form M3): Multi-member LLCs
- Minnesota Corporate Franchise Tax: For LLCs taxed as C Corporations.
Other than some peculiarities, the cutoff date for Minnesota taxes stays the same as the federal tax timeline.
Penalties for Late Filing
The penalties from the federal government come with not filing or filing too late, alongside the penalties from the state of Minnesota. Depending on how late you are, these penalties add up.
- IRS Penalties: Not filing can get you a fee of 5% based on the remaining unpaid tax, including each month, but only up to 25%.
- Minnesota Penalties: Minnesota imposes a late filing penalty fee based on the type of return and taxes owed.
To avoid penalties, stay proactive. Submit your return on time and don’t hesitate to request an extension if needed.
Tips for Minnesota LLC Owners
Keep Accurate Records: Track income, expenses, and any financial transactions relating to your LLC during the year. This will ease the burden of filing your tax returns come filing season.
Consider Hiring a Tax Professional: When dealing with multi-member LLCs, electing corporate tax status, or other complexities, tax filing for LLCs can become tricky. Having a tax professional on your side can help ensure optimal outcomes and compliance with regulations.
Take Advantage of Deductions: Business expenses like travel, office supplies, and home office expenses are eligible deductions for LLC owners. Keep a documented list of deductions to lower your tax payments.
How EasyFiling Can Help Minnesota LLC Owners
Tax filing requirements can be quite daunting, but not for Minnesota LLC owners when EasyFiling is involved.
Single-member LLCs, multi-member LLCs, and those who have elected S Corp or C Corp tax statuses can all rely on EasyFiling to ensure accurate and timely submission of IRS tax returns.
Why Should You Use EasyFiling for Minnesota LLC Tax Issues?
✅ Expert Tax Help: We assist you with identifying the correct forms as well as deductions, along with providing guidance that will lessen your tax payment requirements.
✅ Hassle-Free Filing: Let us do the paperwork while you continue running your business.
✅ Complies with State and Federal Law: Your LLC will comply with both IRS and Minnesota state taxes.
✅ Affordable & Reliable: Get economical solutions easily for tax filing and fit your business requirements.
Get Started Today!
Leave the stress of tax season behind and allow EasyFiling to take care of your Minnesota LLC tax returns. Reach out today to get professional help and to experience filing with ease!
Frequently Asked Questions (FAQs)
1. Will a Minnesota LLC need an EIN to file taxes?
If the LLC has more than one member, employs staff, or has S Corporation and C Corporation tax elections, then it must apply for an EIN with the IRS.
2. Can an S Corporation be filed for a Minnesota Single Member LLC?
A Single Member LLC has the ability to be taxed as one when they submit Form 2553 with the IRS which allows them to save money in self-employment taxes.
3. What can Owners of Minnesota LLCs deduct?
LLC owners are allowed to deduct business-related expenses, including but not limited to housing, utility payments, travel costs, equipment purchases, employees’ salaries, advertising, and other operations. It is also important to note that maintaining accurate records is very important.
4. Is it possible to file Minnesota LLC taxes online?
Yes. A majority of federal forms and Minnesota state tax documents can be filed online through e-filing systems provided by the IRS and the state of Minnesota.
5. What are the consequences of not filing taxes for a Minnesota LLC?
Not filing taxes could mean tax shortages, charges for late payments and interest, or even worse, the cancellation of your business by the IRS or the Minnesota Department of Revenue.
Nabin Adhikari
