So, you started an LLC—congrats! 🎉 You’re officially a business owner, calling the shots and building something great. But now it’s tax season, and suddenly, words like Form 1065, K-1s, and self-employment taxes are being thrown at you like a game of financial dodgeball.
Feeling overwhelmed? You’re not alone. Many LLC owners don’t realize their tax filing responsibilities until crunch time or worse, until they get a penalty notice from the IRS.
At Insogna CPA, a top Austin, Texas CPA firm, we help business owners like you navigate LLC taxes, avoid mistakes, and maximize deductions so you keep more of your hard-earned money. Let’s break it all down without the confusing tax jargon.
Why LLC Taxes Can Be Confusing (And How to Make Sense of It All)
Unlike corporations, LLCs don’t have a one-size-fits-all tax setup. The IRS doesn’t tax your LLC as an entity; instead, it decides how your business is taxed based on the number of owners (a.k.a. members).
Here’s Where Many LLC Owners Get Tripped Up:
1️. Single-Member LLCs – The IRS treats you like a sole proprietor by default, meaning you report business income on Schedule C of your personal tax return. Simple enough.
2️. Multi-Member LLCs – The IRS sees you as a partnership, which means you need to:
- File Form 1065 (the partnership tax return).
- Issue Schedule K-1s to each member, detailing their share of profits or losses.
The problem? Most multi-member LLC owners don’t realize they need to file Form 1065 until it’s too late. And missing that deadline? The IRS will happily charge you $220 per partner, per month in penalties.
The good news? With a little planning, you can avoid unnecessary penalties and confusion.
How to File Taxes for Your LLC the Right Way
Step 1: Know Your LLC’s Tax Setup
Before you file, figure out how the IRS sees your business.
- Single-Member LLC: You’ll file your taxes on Schedule C, attached to your personal return (Form 1040).
- Multi-Member LLC: You must file Form 1065 and send K-1 forms to your partners. They’ll report their share of business income on their personal tax returns.
Thinking about S-Corp status? If your LLC makes $50K+ in net profit, electing to be taxed as an S-Corp could save you thousands in self-employment taxes. But you need to file Form 2553 with the IRS to make it official. (We can help with that!)
Step 2: Get Your Financials in Order
Taxes are way easier when your books are clean. If you’ve been tracking expenses in a shoebox (or worse, not tracking them at all), it’s time for an upgrade.
What You’ll Need for Tax Filing:
✔ Profit & loss statements and expense reports.
✔ Bank and credit card statements.
✔ Payroll records (if you have employees).
✔ Receipts for major business expenses.
Pro Tip: If you’re using QuickBooks, Xero, or another accounting tool, make sure all your transactions are categorized correctly before tax time.
Step 3: File the Right Tax Forms (And Avoid IRS Penalties)
Here’s what you’ll need to file based on your LLC type:
Single-Member LLCs:
- Report your income & expenses on Schedule C, attached to Form 1040.
- Pay self-employment taxes (yep, you’re on the hook for Social Security & Medicare).
Multi-Member LLCs:
- File Form 1065 with the IRS by March 15.
- Issue Schedule K-1s to each partner, detailing their share of the business’s income.
- Partners must report their K-1 income on their personal tax returns.
Miss the deadline? You could be facing a $220 per partner, per month penalty from the IRS. Don’t wait until the last minute!
Step 4: Don’t Forget About State Taxes
Your federal tax return isn’t the only thing you need to worry about. Depending on where your LLC is registered, you may also owe state taxes.
State Tax Considerations for LLCs:
✔ Texas Franchise Tax: Texas doesn’t have personal income tax, but LLCs must file an annual franchise tax report to stay compliant.
✔ California LLC Fees: If you operate in CA, expect an $800 annual franchise tax, plus additional fees based on your revenue.
✔ Multi-State LLCs: If your business operates in multiple states, you might owe state taxes in each one.
Not sure what your state requires? A CPA in Austin, Texas (like us!) can help you figure it out.
Common LLC Tax Mistakes (And How to Avoid Them)
- Missing the Form 1065 deadline (for multi-member LLCs) = automatic IRS penalties.
- Forgetting state tax filings, leading to fees or even LLC suspension.
- Not tracking deductions properly, resulting in paying more than you owe.
- Skipping estimated tax payments, which can trigger IRS penalties.
The Fix: Work with an experienced Austin small business accountant (that’s us!) to handle the details so you can focus on actually growing your business.
Let’s Make LLC Tax Filing Easy
Filing LLC taxes doesn’t have to be stressful but waiting until the last minute can cost you. Whether you’re a single-member LLC, multi-member LLC, or considering an S-Corp election, we’ve got your back.
At Insogna CPA, a trusted Austin accounting firm, we:
✔ Make sure you file on time to avoid IRS penalties.
✔ Maximize deductions so you don’t overpay.
✔ Help you plan ahead so tax season is stress-free....
Don’t risk IRS penalties—schedule a consultation with Insogna CPA today and let’s make sure your LLC taxes are filed correctly!