Building an LLC in Utah has certain tax obligations attached to it that must be followed by the business owner to remain compliant with the IRS and State Revenue Department.
The tax filing obligations are based on how the LLC is organized, whether it is a single-member LLC, multi-member LLC, or if the entity has opted for corporate taxation.
In this article, we will discuss the process of IRS tax return filing for Utah LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
Understanding Utah LLC Taxation
By default, a Utah LLC is treated as a pass-through entity which means that income earned as well as any deductions and credits will be a part of the owner’s tax return.
An LLC is able to pass through the income as well as be taxed as a corporation which changes the IRS tax filing requirements based on the LLC taxation status.
Single Member LLC Tax Obligation Filing
- For federal tax obligations, a single-member LLC (SMLLC) is treated as a disregarded entity.
- The individual needs to file business income and expenses on Schedule C (Profit or Loss from Business) which is part of their tax return (Form 1040).
- The individual is responsible for self-employment tax (Social Security and Medicare) and pays this using Schedule SE.
- If the LLC makes substantial income, estimated quarterly tax payments may have to be made.
Multi-member LLC Tax filing
- A multi-member LLC has partnership status for federal taxation purposes.
- The LLC is required to submit Form 1065 (U.S. partnership income tax return) to record the business activity.
- Each member gets a Schedule K-1 that summarises the portion of the income or losses they are responsible for on their tax return (form 1040).
- Earnings are subject to payment of self-employment tax.
LLC taxed as an S Corporation
- Form 2553 can be submitted to the IRS by Utah LLCs wishing to take up S corporation status.
- The LLC has to file Form 1120-S (U.S. Income Tax Return for an S Corporation).
- Business profits are passed on to owners and reported on schedule K-1 by the firm, but this results in lesser self-employment tax as owners receive a salary and dividend split.
LLC taxed as a C Corporation
- LLCs that opt for C corporation status are required to file Form 1120.
- US corporations are obligated to pay corporate income tax, while shareholders receive dividend income which is taxed at a personal level.
Utah State Tax Requirements for LLCs
Furthermore, Utah LLCs must meet certain other tax expectations at the state level.
Utah Income Tax
- LLCs in Utah do not pay state income taxes separately; profits pass-through taxation and are taxed at the individual level.
- Taxable income in Utah has a flat 4.65% state income tax rate.
Utah Sales Tax
- An LLC selling tangible property or resalable services in Utah must obtain a Sales Tax Permit and charge buyers’ sales tax.
- The sales tax percentage differs for each area, as well as for the specific items or services provided.
Utah Employer Taxes
- An LLC having employees must register for the Utah Unemployment Insurance (UI) Tax with the Utah Department of Workforce Services.
- In addition, employers must deduct the Utah state tax from the salary of their employees.
Utah Franchise Tax
- Utah does not impose a franchise tax on LLCs, unlike some other states.
Important Tax Documents for Utah LLC Owners
To meet their tax obligations: Utah LLC Owners need to collect the following key documents:
EIN (Employer Identification Number): This is necessary for tax filings when the LLC has employees or multiple members.
Form 1040 & Schedule C: For single-member LLCs.
Form 1065 & Schedule K-1: For multi-member LLCs.
Form 1120-S or 1120: For LLCs that are taxed as corporations.
Sales Tax Reports: For businesses that do sales, and if applicable.
Payroll Tax Filings: For LLCs that have employees.
Filing Deadlines And Compliance
Form 1040 & Schedule C (Sole Proprietor): Due by April 15. If it falls on a weekend or public holiday, it is due the next business day.
Form 1065 (Multi-Member LLCs) is due by March 15: Extensions are available until September 15.
Form 1120-S (S Corporations) is due by March 15: Extensions are available until September 15.
Form 1120- C Corporations are due on April 15: Extensions are available until October 15.
Utah state income tax return is due by April 15.
Quarterly estimated taxes are due by April 15, June 15, September 15, and January 15 of the year.
Penalties for filing after the deadline
Failing to file taxes on time can result in being fined by:
Late filing penalties: For unpaid taxes, you will be fined up to 5 percent per month, to a maximum of 25 percent.
Late payment penalties: For unpaid balances, you will be fined up to 0.5 percent per month.
Not filing a Form 1065: A fine of $220 per month for every partner (Up to twelve months).
Not filing a Form 1120 Or 1120-S: A fine of $485 at the minimum or five percent of unpaid taxes.
Interest charges: Accumulate until taxes are paid off completely.
Common Tax Deductions for Utah LLCs
Deductions can be maximized to lower taxable income which includes the following:
Business expenses: Rent, Utilities, marketing, office supplies, and other related expenses.
Employee-related costs: Salary, benefits, and other payment-related employer expenses.
Self-employment tax: LLC pays 50% self-employment tax.
Depreciation: The business assets are gradually written off claiming their worth over time.
Home office deduction: A specific portion of the house not used for other purposes qualifies for business use deduction.
Travel expenses: Business trip-related flights, meals, lodging.
How EasyFiling Can Help File Utah LLC tax
EasyFiling can help Utah LLC to file taxes compliantly and easily. This is what EasyFiling does.
Assistance with Tax Filing: EasyFiling will help LLC owners who are residents of Utah file state taxes, sales taxes, annual reports, and any other assignments given by the Utah State Tax Commission.
Registered Agent Services: For a registered agent service, EasyFiling offers a complete solution that keeps your LLC compliant in Utah by receiving and sending all state correspondence and tax documents. This service guarantees that all significant filings are received and none are missed.
Tax Consultation: If you need help understanding the tax obligations of Utah’s LLCs, EasyFiling can explain how filing taxes as a disregarded entity, a partnership, or a corporation affects your LLC.
E-Filing for Annual Reports: Keeping up with state deadlines is easier with EasyFiling, as they help LLC owners e-file their renewal forms and annual reports, allowing their LLCs to remain in good standing within the state.
Tax Forms Guidance: EasyFiling ensures that both income and sales tax filings are processed on time by providing the necessary guidance and forms for their clients.
Tax Compliance Monitoring: EasyFiling helps clients track and not miss due dates for tax filing, enabling the LLC in Utah to avoid fees and penalties.
Frequently Asked Questions (FAQs)
What state income taxes apply to an LLC in Utah?
- Single-member LLCs have the default status of a disregarded entity, meaning a sole owner files the business’ income with their returns. The LLC will not pay state income tax.
- Mult-member LLCs are defaulted to the status of a partnership and members report business income with their tax returns.
- LLCs that elect to be S-Corps or C-Corps must report 4.85% of 2024 Utah State Corporate Income Tax.
Does an LLC in Utah have to pay an annual report fee?
Yes. Every single Utah LLC will have an annual renewal fee for the Utah Division of Corporations and Commercial Code Report which is submitted on the anniversary of the LLC formation. The charge is $18.
What other taxes have to be paid by LLCs in Utah?
- Self-employed taxation: A self-employed person will incur a 15.3% tax rate is they are taxed as a sole prop or a sole partner.
- Income Tax: This is levied on limited liability companies being taxed for Utah will impose their corporate income taxes on them (4.85%).
- Sale Tax: When you are offering services or goods payable for sales, LLCs should keep tax sales from Utah (with various rates depending on where they are).
- Profit Tax: If an LLC in Utah has employees they self-manage. Unreal Employment Profit Tax allows LLCs in Utah to pay these.
Is there a franchise tax for LLCs in Utah?
Utah does not have a franchise tax. However, LLCs that have elected C-Corp taxation do pay corporate income tax.
How does a Utah LLC apply for an EIN?
An Employer Identification Number (EIN) is necessary for multi-member LLCs or those with employees or who opt for corporate taxation. These can be acquired free of charge through the IRS website.
Nabin Adhikari
