It is crucial to understand your tax responsibilities; you need to be aware that if you work you need to pay taxes. If you fall under the category of minor age does not factor on whether you need to pay income tax. Mismanagement of you tax obligation can lead you to bank levies, liens and other potential risks, also these can damage your credit and force you to work through many obstacles. Here are five basic things you can keep in your mind while managing your tax records:
Get an EIN
Employer Identification Number or EIN is the first step toward the world of paying taxes.
EIN also known as Federal tax id number application is a way for IRS to identify your business and track its transactions as LLC is a separate entity and needs its own EIN from IRS. EIN is necessary even if you are not planning to hire any employees. Without an EIN, you won’t be open a bank account for your business.
There are three ways for EIN filing service or getting Tax ID Number Application:
a) You can apply for EIN through IRS website by answering few questions and entering social security number.
b) You can apply for EIN by telephone by calling (800) 829-4933.
c) You can apply for EIN through mail also.
Income Taxes for Single Member LLC
If you operate single member LLC, then the IRS will treat your business as a sole proprietorship. In single member LLC, LLC does not pay taxes instead you mention all profits and losses of the LLC on your personal ITR (Income Tax Return).
Income Taxes for Multi-Member LLC
If your organisation or business has multiple owners, the IRS will treat your business as a partnership. In multi member LLC, the business doesn’t pay taxes but each owner is taxed on their profit shares through their personal ITR (Income Tax Return). If your LLC splits profits and losses in a manner that doesn’t match the interests of each member than is need to request special allocation from IRS also in this case, you must need to consult with a tax lawyer.
Paying Estimated Taxes
LLC owners are members are self-employed, so each member must pay estimated taxes and self-employment taxes to IRS and their state office quarterly. If you are a multi-member LLC than your accountant or tax lawyer can help in this case also in some cases, you can get some exemption if you meet the specific requirements.
Sales Tax and State Tax
Sales tax is a point of purchase tax imposed by state and local governments. Rates and laws differ from state to state, and it can be quite complicated if you sell your product in more than one state. If you operate an LLC, you pay your taxes to state in the same way you do to the IRS through your individual returns. State Tax also differ from state to state as some states charge LLC tax on income earned by that LLC in addition to the member individual income tax other state charge annual fee, unrelated to income. So for business convenience you should check all the rules where you want to do your business.