IRS Tax Return Filing for North Dakota LLC Owners

As a business owner of a Limited Liability Company (LLC) in North Dakota, you will need to recognize the IRS tax return filing requirements of your company.

LLCs have different treatment on taxation from the IRS according to their tax classification, and North Dakota complies with federal tax systems with state-specific regulations.

Not adhering to these obligations may lead to some penalties or legal issues and more.

In this article, we will discuss the process of IRS tax return filing for North Dakota LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.

How LLCs Are Taxed in North Dakota

A Single-Member LLC Taxation

A single-member LLC (SMLLC) is treated as a disregarded entity for tax purposes as a default for SMLLC. Disregarded entity means the following:

• You report the LLC’s revenues and costs in Form 1040, Schedule C of your federal tax return.
• Or if the entity receives rental income, it could be reported on Schedule E.
• The owner is also responsible for self-employment tax (Social Security and Medicare) on the profit earned.
• Single-member LLCs can choose corporate taxation, if they wish, through Form 8832.

Multi-Member LLC Taxation

When your LLC has more than one member, by default, it is also classed as a partnership in taxation:

• The LLC has to file Form 1065 (Return Of Partnership Income For the USA).
• Schedule K-1 is provided to each member detailing their share of profit versus loss.
• Every member reports their allocated income on their tax return located on Form 1040, Schedule E.
• At the partnership level, no income tax is due, instead, members are taxed individually.

LLCs Electing S-Corporation Status

Owners of an LLC can elect to be taxed as an S-corporation by filing Form 2553. There are several tax benefits associated with this such as lower self-employment taxes. Some highlights are:

• The LLC submits Form 1120S.
• Members are issued a schedule K-1 and report income on their tax return.
• Owners may receive a reasonable salary with additional profits distributed as a dividend.
• Properly structuring S-Corporation status can result in substantial tax savings.

LLCs Electing C-Corporation Status

An LLC that makes a C-corporation election using Form 8832 will be taxed at corporate income tax rates:

• The LLC submits Form 1120, a U.S. corporation income tax return.
• Profits are taxed at the corporate level and again as dividends on individual tax returns.
• This classification is useful for companies seeking to reinvest the profits back into the company.

Federal Tax Filing Requirements for North Dakota LLCs

Regardless of any classifications, all LLCs are required to file taxes on a federal level:

• Employer Identification Number (EIN): Required for multi-member LLCs and those with employees.
• Estimated Taxes: Owners of LLCs may need to prep quarterly estimated taxes to avoid penalties.
• Self-Employment Taxes: Obligatory for single member and partner LLC owners.
• Payroll Taxes: Taxes on employee wages must be withheld and sent to the IRS.

North Dakota State Tax Requirements for LLCs

North Dakota LLC Owners Income Tax:

• North Dakota conforms to federal tax categorization.
• Single-member LLCs report income directly on their state tax returns using Form ND-1.
• Multi-member LLCs are required to file a North Dakota Partnership Return, which is Form 58.
• S-Corp LLCs submit Form 60 for the North Dakota S Corporation Income Tax Return.
• C-Corp LLCs submit Form 40 for the North Dakota Corporation Income Tax Return.

North Dakota Sales and Use Tax

An LLC selling taxable goods or services must register with the North Dakota Office of State Tax Commissioner for sales tax permits.

• Different counties and cities have different sales tax rates.
• If sales tax is not collected and paid, it can lead to penalties and lawsuits.

North Dakota Employer Taxes

An LLC that has employees must:

• Privately hold the tax account by registering for withholding tax in conjunction with Form SFN 28756.
• Effect state unemployment insurance payment (SUTA) through Job Service North Dakota.
• Provide new hire status to the North Dakota New Hire Reporting Center.

Filing Deadlines for North Dakota LLCs

• Form 1040 (Single-Member LLCs) – April 15
• Form 1065 (Multi-Member LLCs) – March 15
• Form 1120S (S-Corp LLCs) – March 15
• Form 1120 (C-Corp LLCs) – April 15
• State tax returns are usually due at the same time as federal taxes.

Steps to File Your IRS Tax Return for a North Dakota LLC

• Determine the tax classification of your LLC.
• Cut down all necessary financial records. This may include your income, expenses, payroll reports, etc.
• Fill out all relevant IRS tax forms which would be 1065, 1120, 1120S, or 1040.
• Dissolve the North Dakota state tax filing.
• Federal and state tax returns should be filed at the same time.
• Pay off any open taxes to avoid being penalized later.
• You may consider hiring a tax expert or buying tax software for convenience.

Penalties for Late Filing and Non-Compliance

Failure-to-File Penalty: 5% of unpaid taxes each month, capped at 25%.

Failure-to-Pay Penalty: 0.5% of unpaid taxes each month, with increasing interest over time.

Interest on Unpaid Taxes: This accumulates daily until the unpaid balance has been settled.

Penalties Provided by the State: Extra taxes imposed by North Dakota for defaulting on primary taxes.

North Dakota Secretary of State Lateness: If LLCs continuously refuse to follow rules they may be dissolved.

Common Tax Deductions for North Dakota LLCs

LLC owners in North Dakota can take advantage of deductions that may include:

• Marketing expenses which can include rent, utility bills, materials, tools, and software.
• Deductions for home offices that allow for business activities.
• Deductions made through self-employment taxes that lower Social Security and Medicare tax obligations.
• Premiums paid by self-employed business owners for health.
• Contributions made into retirement plans like SEP IRAs and Solo 401(k)s.
• Amounts spent on business vehicles and other equipment.
• Traveling for business purposes, whether it be flying, lodging, or meals.

How EasyFiling Can Help File Taxes for a North Dakota LLC

Taxes can be difficult to complete for an LLC in North Dakota, however, with EasyFiling, the process is smoother. We can offer:

• Specialized Help: Filling out forms for payment of state tax or IRS, depending on the type of LLC.
• Effective bookkeeping: Easybooks will help keep track of finances more easily, making taxes easier to prepare.
• Compliance Help: Help ensure the LLC is filing appropriate forms for Federal and State taxes.
• Maximization of tax deductions: Generally, helping to reduce taxed profits makes a business more productive.
• Help with Paying Estimated Taxes: Helping file quarterly taxes to steer clear from penalties enforced by the IRS.

With confidence, we state that we help North Dakota LLC owners comply with taxes and bookkeeping while they focus on growing their businesses.

Conclusion

Remember that expenses are given both at the federal and state levels when filing taxes for your North Dakota LLC. Knowing how your LLC will be taxed and fulfilling all requirements will aid in the avoidance of penalties.

Involving the right professional, meticulous planning, and accurate bookkeeping can smooth out the process.

For additional bookkeeping and tax filing help, along with ensuring compliance and good standing for your business, contact a tax expert or try EasyBooks from EasyFiling.

Frequently Asked Questions (FAQs)

Do North Dakota LLCs pay state income taxes?

Single-member or multi-member LLCs do not pay state-level income taxes at the entity level. Instead, the owners report income on their tax returns.

When is the tax filing deadline for an LLC located in North Dakota?

Deadlines differ depending on one’s tax classification, though many tend to line up with federal deadlines. For individual taxes, the deadline is April 15, while the deadline for S-Corp and partnerships is a month earlier on March 15.

Is there an annual franchise tax or LLC fee in North Dakota?

No, there is no annual franchise tax or LLC fee required in North Dakota.

Is it possible for an LLC to deduct business startup expenses?

Yes, an LLC can deduct up to $5000 in startup costs, amortized over five years.

Do Services In North Dakota Have A Sales Tax?

Certain service types do carry sales tax. For more information, get in touch with the taxing department in the particular region.