Federal Taxes for LLCs: What You Need to Pay and File

Most LLCs don't pay federal income tax directly — income passes through to members, who report it on their personal returns. But that doesn't mean there's nothing to file. Depending on how your LLC is structured, you may owe self-employment tax, estimated taxes, payroll taxes, or corporate income tax. This guide breaks down each one.

By default, LLCs don't pay federal income tax at the entity level. Instead, profits and losses pass through to members, who report their share on their personal federal returns. The IRS calls this pass-through taxation, and it's the default for both single-member and multi-member LLCs.

The filing forms differ depending on how many members your LLC has. A single-member LLC is treated as a disregarded entity — the owner reports income and expenses on Schedule C of their personal Form 1040, with no separate business return required. A multi-member LLC is treated as a partnership by default and must file Form 1065, the U.S. Return of Partnership Income. Each member then receives a Schedule K-1 showing their share of income, deductions, and credits to report on their own return.

One thing that catches people off guard: pass-through taxation doesn't mean you avoid all federal taxes. It means the business itself doesn't pay income tax — but you still do, on your share of the profits.

LLC members who are active in the business owe self-employment tax on their share of net earnings. The rate is 15.3% — made up of 12.4% for Social Security and 2.9% for Medicare. This covers both the employee and employer portions, since LLC members aren't on a payroll the way W-2 employees are.

You calculate self-employment tax on Schedule SE, which you file with your Form 1040. Net earnings are your gross business income minus allowable deductions. The Social Security portion of the 15.3% rate applies only up to the annual wage base limit — $168,600 for 2024. Earnings above that threshold are still subject to the 2.9% Medicare portion.

You can deduct half of your self-employment tax when calculating your adjusted gross income on Form 1040. It doesn't reduce the tax itself, but it does lower your taxable income.

Most LLC members need to make federal estimated tax payments four times a year. Because LLC income isn't subject to withholding the way a paycheck is, the IRS expects you to pay as you go. The general rule: if you expect to owe $1,000 or more in federal taxes for the year, you need to make estimated payments.

Estimated payments are due four times a year — generally in April, June, September, and January. Use Form 1040-ES to calculate and submit each payment. If you skip payments or underpay, the IRS can charge an underpayment penalty even if you pay the full amount owed when you file your annual return.

Once your LLC hires employees, federal payroll tax obligations kick in. You'll need to withhold federal income tax and the employee's share of FICA taxes — Social Security and Medicare — from each paycheck. Your LLC also pays a matching employer share of FICA on top of that.

Plus, your LLC owes federal unemployment tax (FUTA) on the first $7,000 of each employee's wages per year. The FUTA rate is 6.0%, though most businesses qualify for a credit that reduces the effective rate. You report and deposit payroll taxes using Form 941 (quarterly) and Form 940 (annually for FUTA).

Payroll tax rules have their own deposit schedules and deadlines that vary based on your payroll size. A tax professional can help you figure out the right deposit frequency for your LLC.

By default, LLCs are pass-through entities. But an LLC can elect to be taxed as a C Corporation by filing Form 8832 with the IRS. If you make that election, the rules change significantly — the LLC pays federal corporate income tax at the entity level, not the members.

The federal corporate income tax rate is a flat 21% on taxable income. C Corp LLCs file Form 1120, the U.S. Corporation Income Tax Return, annually. Unlike pass-through taxation, the business pays tax on its profits regardless of whether those profits are distributed to owners. If profits are then distributed as dividends, owners pay tax again on those dividends on their personal returns — this is the double taxation trade-off that comes with C Corp status.

An LLC can also elect S Corporation status by filing Form 2553. S Corps are still pass-through entities, but the structure can reduce self-employment tax for owner-employees who pay themselves a reasonable salary. A tax professional can help you figure out whether an S Corp election makes sense for your situation.

Every LLC needs an Employer Identification Number (EIN) — the nine-digit tax ID the IRS uses to identify your business. You need one to file federal tax returns, open a business bank account, and hire employees. Even single-member LLCs with no employees generally need an EIN.

You apply for an EIN using Form SS-4. The fastest way is through the IRS online application at irs.gov/ein — approvals are immediate for most applicants. The online tool is available Monday through Friday, 7 AM – 10 PM ET. Fax applications take about 4 business days.

Your filing requirements after that depend on your LLC's tax classification. Single-member LLCs file Schedule C with Form 1040. Multi-member LLCs file Form 1065 and issue Schedule K-1s to each member. LLCs taxed as C Corps file Form 1120. Getting your tax classification right from the start saves a lot of cleanup later.