A limited liability company, or LLC, has a special status with the IRS, it is the only type of business entity where owners can choose how the IRS treats the business for federal income tax. The IRS require different filing mode for different entities. Despite this flexibility, however, the basic preparations for the submission of LLC tax return is generally the same as in all entities.
Prepare taxes in Katy: LLC.
Check your LLC’s IRS tax election. Every LLC must choose how to be treated for the federal tax purposes. A One-member LLC can choose to be taxed as a sole proprietorship or a corporation. A multiple member LLC can elect to be taxed as a partnership or a corporation. LLC taxed as a sole proprietorship does not file tax at all; Instead, a member records all income and expenses in schedule C of their personal tax return, or 1040. LLC taxed as a partnership will file Form 1065 and the LLC taxed as a corporation will file form 1120. To prepare taxes in Katy, LLC should have a confirmation letter from IRS that reflects the choice made for tax classification as part of its records.
If the LLC filed tax returns the previous year, retrieve it. Unless it is the first year that the LLC will be filing tax returns, you will still need a tax return filed last year to complete the returns of the current year. The previous year’s tax returns include the carryover amounts and depreciation schedules, as well as the distribution of income and loss among members.
Prepare the company’s book. The company should have a procedure for recording and classification of income and expenses, either through an accountant or accounting program. Get a printed copy of the balance of income and expenses of the business.
Update the records of capital accounts of each member. Ownership of LLC is reflected in the capital account of the member. The capital account is the amount of money, property, and services that a member has contributed to the Company, less any withdrawal. In general, the capital accounts also reflects the right of each member to the distribution of profits and loss of the company.
To prepare taxes in Katy, keep an accountant or use the services of professional tax personnel. Usually, if the LLC is taxed as a sole proprietorship where the member is used to preparing his own taxes, he will probably continue to do so. An LLC that is classified as a corporation must conform to the most advanced tax rules, and professional accountants may be needed.