How Do I Do My Quarterly Business Taxes for My Maryland LLC?
A Limited Liability Company (LLC) is a popular business structure for many small businesses throughout Maryland. LLCs offer many of the benefits of a sole proprietorship or partnership with the liability protection of a corporation.
LLCs are not recognized as unique business entities by the Internal Revenue Service for tax purposes. But, LLCs are recognized as legal entities under state law. Therefore, the tax requirements for an LLC are slightly different from other business structures. You can avoid problems with LLC quarterly and annual taxes by working with a Maryland business tax attorney.
The Type of LLC You Choose for Tax Purposes Impacts Tax Filings
An LLC by default is taxed as a partnership unless it has only a single member in which case it is taxed as a sole proprietorship. However, an LLC can choose instead to be taxed as a corporation (C-Corp or S-Corp).
Unless the LLC is taxed as a corporation, it is a pass-through entity. A pass-through entity does not pay taxes on income. Instead, the income and expenses pass through to the members (owners). Each member files personal tax returns that include their share of the LLC’s profits and losses.
Paying Estimated Quarterly Income and Self-employment Taxes
Members (and not the company) may be required to file estimated quarterly taxes and self-employment taxes unless the company is taxed as a corporation. Your quarterly taxes are based on what you estimate you will earn as profit from the LLC for that quarter.
Generally, the quarterly estimated tax payments are based on last year’s profits. Divide your income taxes and self-employment taxes owed for the previous year into four equal payments. If you anticipate earning about the same income level, use those figures to pay your estimated taxes for the current tax year.
The IRS says that if both of the following apply, you must pay estimated taxes:
You anticipate owing at least $1,000 in tax for 2021 after deducting allowable withholding and refundable credits
You expect your withholding and credits to be the smaller of 90 percent of the tax to be shown on your tax return for the current year or 100 percent of your tax shown on the previous tax year’s return.
Remember, you may also be required to pay quarterly estimated tax payments to Maryland.
Failing to pay estimated quarterly income taxes and self-employment taxes could result in substantial penalties at the end of the year. If you are unsure whether you need to file quarterly tax returns for an LLC, it is best to seek experienced tax advice from a tax lawyer before you make costly mistakes.
Other Monthly or Quarterly Tax Returns Filed by LLCs
LLCs may not be required to file annual tax returns and pay income taxes when they are pass-through entities. However, an LLC may be required to file administrative returns to report and pay other types of taxes such as sales tax, employment taxes, property taxes, and other types of taxes. The LLC structure and unique business operations dictate whether these taxes are due and whether they must be paid by filing monthly, quarterly, or annual tax returns.
Contact Our Maryland Business Tax Attorney for More Information
Business taxes can be very confusing. Because the rules for LLCs vary depending on numerous factors, it can be challenging to know what rules to follow for your specific LLC. A simple error could result in costly, time-consuming audits.
Maryland business tax attorney Steve Thienel reviews your current tax strategy and process to ensure you comply with all business tax laws. We also help you identify ways you might save money on taxes. Together we can prevent the government from taking more than its share of your company’s hard-earned profits.
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