When it comes to tax purposes, the IRS does not recognize a limited liability company (LLC) as a separate entity. Instead, it considers LLCs as disregarded entities. This means that LLC owners must choose a tax classification such as a corporation, partnership, or sole proprietorship. In the case of LLCs without employees or earnings, there are specific IRS forms that need to be filed to report expenses and losses. Let’s explore these forms in more detail.
Individual Return
For single-member LLCs, business taxes are filed through individual tax returns. The owner must complete a Profit and Loss From Business” Form 1040. Even if the business has no earnings, this form is used to report the expenses incurred by the business. Deductible expenses related to advertising, travel, legal services, and interest paid on business loans can be entered on this form. Additionally, any business losses should also be reported.
Partnership Return
LLC owners have the option to file taxes as a partnership. In this case, they must complete a U.S. Return of Partnership Income Form 1065. This form reports gross receipts, sales, income, and net losses. It is also used to report business deductions. By choosing this tax classification, LLC owners can take advantage of the partnership tax benefits.
Corporate Return
If LLC owners prefer to file taxes as a corporation, they need to submit an Entity Classification Election Form 8832. This form establishes the LLC as a corporation for tax purposes. It requires owners to specify the type of election and the type of entity they are confirming eligibility to file as a corporation. Additionally, each LLC member must sign a consent statement indicating their authority to make the corporate election.
Specific Expenses of LLC
In certain cases, an LLC may need to file additional forms to report specific expenses. For example, if the business made payments for rents or other services totaling $600 or more, it must file a Form 1099-MISC. There are other types of 1099 forms, each serving a different purpose. Form 1099-DIV, for instance, is used to report dividends from banking products like money market funds, mutual funds, and stocks. Other 1099 forms report cancellation of debts, proceeds from real estate transactions, and acquisitions of secured property.
By understanding the IRS forms required for an LLC without employees or earnings, business owners can ensure they are meeting their tax obligations. Whether filing as an individual, partnership, or corporation, these forms provide a way to report expenses, losses, and other financial information. It is important to consult with a tax professional or accountant to ensure accurate and timely filing of these forms.
