Filing taxes for a Limited Liability Company (LLC) taxed as a partnership involves more than just a standard tax return. If your LLC has two or more members, the IRS treats it as a partnership by default, and you must follow specific filing requirements. Here’s how to file taxes for LLC partnership step-by-step.
Step 1: Understand How LLC Partnerships Are Taxed
An LLC partnership is a pass-through entity, which means it doesn’t pay federal income taxes itself. Instead, profits and losses pass through to each partner’s personal tax return.
Step 2: File Form 1065 – U.S. Return of Partnership Income
Each year, your LLC partnership must file IRS Form 1065, which is the informational return showing the business’s income, deductions, and profit or loss. This form is due by March 15 (or the 15th day of the third month after the tax year ends).
Step 3: Issue Schedule K-1 to Each Partner
With Form 1065, you’ll also complete Schedule K-1 (Form 1065) for each partner. This form details each partner’s share of the LLC’s income, deductions, and credits. Each partner uses this Schedule K-1 to file their individual income tax return (Form 1040).
Step 4: Pay Self-Employment Taxes
Partners must pay self-employment tax (Social Security and Medicare) on their share of the LLC’s income. This is reported on Schedule SE, filed with their personal tax return.
Step 5: Consider Estimated Quarterly Taxes
Since taxes aren’t withheld from partnership distributions, partners may need to pay quarterly estimated taxes using Form 1040-ES.
State Filing Requirements
Most states also require separate filings for LLCs and their members. Check with your state’s tax authority for details.
Final Thoughts
Knowing how to file taxes for LLC partnership is crucial to remain compliant and avoid IRS penalties. Keep accurate records, meet all deadlines, and consult a tax professional if needed.
