Have a Tax Question? Ask a Tax Expert
Hi and welcome to Just Answer!I will help you to navigate the tax matter - and will address all your tax related questions.
A Limited Liability Company (LLC) is a business structure allowed by state statute. Owners of an LLC are called members. Most states also permit “single-member” LLCs, those having only one owner.Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”).
An LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation.
Specifically, an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes. That means - the LLC doesn't file its own income tax return - but all income and expenses are reported on owner's individual tax return.
I have not done anything yet but I would like to do the right thing and file. I got an automated call from IRS to file so I logged into the website and I have no clue what I should be doing.
For federal tax purposes - you will report all business income and expenses - on the schedule C -http://www.irs.gov/pub/irs-pdf/f1040sc.pdfThe net income (after deductions)will be reported on the form 1040 line 12 - http://www.irs.gov/pub/irs-pdf/f1040.pdfIf the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax and net income is likely self-employment income and 15.3% self-employment tax would be required.Self-employment taxes from schedule SE will go to the form 1040 line 56 - http://www.irs.gov/pub/irs-pdf/f1040.pdf Also - you will deduct half of self-employment taxes on the line 27. Generally - that all you needs for income tax purposes . Please review all possible deductions - that might help to reduce income tax liability.
You may either prepare your tax return by yourself or may use any tax preparation service.If you decide to do by yourself - you may either fill tax forms or may use a tax preparation software.I provided above referenced to forms - please take a look. You may print them from the IRS website.
I kept all my records of charging my services to my client. Can I claim the rent payment each month as my business? I use a room in my apartment as my office, I use my personal cell phone for my business.
Since I pay myself from my business account, do i still have to file a personal taxes?
You may deduct ONLY business related expenses on the schedule C.None of personal expenses could be deducted.Specifically - if you are using a cell phone for business - you need to determine the percentage of business use - and may deduct prorated part of your payments.
You also may deduct the cost of your home office. But there are special requirements. You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room. You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.
For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. Generally - you need to determine the area of the room that is used for your business - and percentage of your total home. Then - you will deduct a business portion of your rent and utilities.
Since I pay myself from my business account, do i still have to file a personal taxes?Because the LLC is disregarded entity for income tax purposes - it is ignored - and all income and deductions are reported as YOUR income and your deductions. There is no income tax return for the LLC - all are reported on YOUR individual tax return.So - you personally will pay income and self-employment taxes.
Ok so my first step is to fill out the Schedule C on the IRS website?
If you decide to prepare your tax return by yourself - yes - schedule C that will be your starting form.You may print that form from here - http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Just you assessing my questions, Should I hire someone to do it for me? Or is it possible for me to do it by myself.
That is your choice. If you do not feel comfortable to prepare your tax return - you might better to use any tax preparation service. But that is up to you.
You are not required to use the tax service - that is up to you.
Thank you so much for answering my questions. I just don't want to go to jail so I am going to print out the forms.
You should not worry about jail... that most likely is not an issue. But be sure you correctly calculate your taxable income - to minimize your obligations.
I am from a small country and doing things wrong will take you to jail so I am not sure about the US.:) When I got the call from IRS today that I need to login to the website it totally freaked me out.
I appreciate your help!