What Happens If I Don’t Pay My LLC Tax?

Tax Obligations for S Corporations:

• S corporations typically don’t pay income taxes. However, S corporations do need to pay estimated tax when their tax totals $500 or more.
• Estimated tax payments are quarterly payments made to the IRS and state tax agencies to pay taxes on the income you estimate your business will earn for the year.
• Keep your business tax records for at least three years from the date you filed your tax return in case your business is audited.

Tax Considerations for LLCs:

• LLC members are typically not responsible for any of the company’s debts.
• A Single-Member LLC is taxed like a Sole Proprietorship by default from the IRS.
• Limited Liability Companies formed in California from 2021 through 2023 are waived from the annual $800 minimum tax.

Consequences of Not Paying LLC Annual Tax:

• LLC owners must report all profits or losses on personal tax returns.
• LLCs avoid double taxation; profits and losses pass through to the owners’ personal tax returns.
• Late payment of annual fees for maintaining LLC status may lead to significant penalties.

Failure to File Taxes for LLC:

• Failure to file LLC taxes on time incurs a Failure to File Penalty of 5% of unpaid tax liability per month, up to 25% of total unpaid taxes.
• Late filing may lead to additional fines, interest, and penalties.

Tax Treatment for LLCs Without Income:

• LLCs, even with no income, should file tax returns to comply with the law.
• Operating at a loss or with no income doesn’t exempt an LLC from filing tax returns.

Tax Regulations for One-Member LLCs:

• One-member LLCs are treated as sole proprietorships for tax purposes.
• The sole owner must report all profits or losses of the LLC on personal tax returns.

Tax Obligations for Self-Employed Individuals:

• Self-employed individuals generally must file an annual return and pay estimated tax quarterly.
• Self-employed individuals must pay self-employment tax (SE tax) as well as income tax.