Tax Ninja Tips

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September 21, 2023
Author: Adam Kintigh

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Tax elections for Corporations and LLCs has been a confusing topic for just about everyone. We’re going to share with everyone the “Ninja Tips” for taxes, and how you can avoid penalties.

When forming a corporation, you submit your SS-4 application and the IRS issues your Employer Identification Number (EIN). You now have a corporation that is taxed as a C-Corporation and is expected to file form 1120 by March 15th of the following year.

In the body of the letter, the IRS states, “If you choose to be taxed as an S-Corporation, please submit form 2553, S-Election.”  If you fill out the form 2553, in a few months, the IRS will send you a letter: S-Corporation Acceptance Letter.” KEEP THIS LETTER!  Your tax professional has to submit this letter when filing your taxes!

When forming an LLC, you get 4 choices. Again, we fill out the SS-4, and the IRS issues the EIN.  Here’s the tricky part:  When completing the SS-4 application, the IRS asks, “Number of Members.” Generally, if you’re married, you would put ONE. This indicates to the IRS that the LLC will be DISREGARDED for tax purpose. You’ll get a letter from the IRS letting you know that they expect all profits and losses to report on your personal tax return, exactly the same as if you didn’t have the LLC.

A single-member LLC disregarded for tax purpose works well when you have a couple rental properties, or if you’re investing as a limited partner in syndications. However, if you’re starting an active income producing business, by yourself or with a spouse, you’ll most likely want the LLC taxed as an S-Corp. Simple enough, just like changing a C-Corporation to an S-Corporation, we complete form 2553, and voila – your LLC is now taxed as an S-Corp. 

The IRS will send you the S-Corp Acceptance letter, and again, KEEP THIS LETTER! 

There are certain circumstances where you’ll want your LLC to be taxed as a partnership, form 1065.  When completing your SS-4, you’ll input TWO (or more) for the number of members. The IRS will send you a letter stating, “You must file form 1065 by March 15th (of the following year).”    

Here’s the cliff notes:

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               Form 1120 – C-Corp – Due April 15

               Form 1120S – S-Corp – Due March 15th

               Form 1065 – Partnership – Due March 15th

               Form 1040 – Personal – Due April 15th

The good news:  if you screwed something up, it can (almost) always be corrected. If you’re in need of some guidance, NCH has team of experts to help!

With NCH, the state’s top business formation service, you can register your LLC in Nevada quickly and easily. Our specialists will help you choose the right entity for your company and understand why an LLC in Nevada is your best option. We’ll assist you with all necessary Nevada LLC forms, including the vital Articles of Organization, and help you comply with state regulations. In addition, we offer expert assistance with tax compliance, credit building, and payroll management. Schedule a private consultation to explore effective solutions to minimize tax liabilities and protect your wealth. Start unleashing your LLC’s full potential today with NCH. Schedule a consultation with Adam Kintigh today!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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