Washington DC LLC Taxes
Taxes are part of our day to day life. Both you and your DC LLC are liable to pay a variety of taxes to the state and federal governments. Knowing which taxes you are required to pay is very crucial to the growth and success of your business. Also, state and federal laws require all LLCs to pay taxes and failure to do so can get owners, partners, or shareholders of the business into trouble with authorities. LCCs in Washington DC are required to pay various taxes such as Washington DC sales tax, Washington DC state tax, federal tax, payroll tax, and self-employment tax.
If you need help filing your LLC taxes in Washington DC, LLC Formations can offer you a quality and affordable Washington DC LLC Tax Filing Service.
How Your Washington DC LLC will be Taxed
Profits made by your LLC based in Washington DC are not taxed at the same level as those of C Corporations. The process of taxing LLCs in Washington DC entails:
1. All LLC owners or partners remit self-employment tax on the profits they make.
2. All LLC owners or partners remit DC state tax on any profits they make, minus state deductions and allowances.
3. All LLC owners or partners remit federal income tax on any profits they make, minus federal deductions and allowances.
4. Some LLCs remit Washington DC sales tax on products sold.
5. Employers remit payroll tax on any wages they pay to staff.
6. Employees pay payroll, state and federal tax on their wages.
Items 1, 2 are viewed as ‘pass-through’ taxes for income for the members, managers or owners of an LLC who get from profits from the business. Any profits are declared on state and federal personal tax returns, and that’s where you should remit those taxes.
Washington DC Income Taxes
Washington DC’s office of Revenue and Tax requires all LLC to pay 2 main types of income taxes namely the Washington DC sales tax and the Washington DC income tax. As an owner of a business in Washington DC, you will be required to pay income tax on any money you pay yourself. This money should be highlighted in your personal tax return where it will be subject to personal income tax. The standards rates of Washington DC taxes will apply and you may also qualify for certain deductions and allowances.
Employees are also required income tax on their earnings. The tax rate for these taxes ranges between 4% and 8.95%, based on your wages.
Washington DC Sales Taxes on LLC Sales
Businesses that deal in physical products and certain kinds of services are required to pay sales tax (also referred to as use tax) to the state. Washington DC sales tax is calculated at the point of sale. The sales tax rate can vary based on the city, county, or region your business is situated in. You are required to pay sales tax on any goods, personal property, or tangible products you sell such as raw materials, books, appliances, electronics, cars, furniture, etc. You may also be required to pay sales tax if you sell certain specialized services within Washington DC.
Most states do not impose sales tax on products that are considered fundamental or basic necessities such as gas, clothes, medication, and food.
Federal Self-Employment and Income Taxes
There are various federal taxes that Washington DC LLCs are required to pay. These are federal income tax and self-employment tax. These taxes are reflected on your tax return forms and should be calculated and paid on time.
Federal Self-Employment Tax
All LLC managers, members, and owners who get profits from their Washington DC LLCs are required to remit self-employment tax to the federal government. This tax is also referred to as Medicare tax, Social Security, or FICA. The tax is deducted from all the earnings that get from your LLC in Washington DC. The current federal self-employment tax rate is 15.3%.
You can minus your LLC’s expenses from your income in order to determine how much self-employment tax you should pay. Below are several examples of how much self-employment tax you may be required to remit, based on your total earnings:
* On earnings of $40,000, you would owe self-employment tax of $6,120.
* On earnings of $100,000, you would owe self-employment tax of $12,240.
* On earnings of $140,000, you would owe self-employment tax of $21,420.
* On earnings of $160,000, you would owe self-employment tax of $24,480.
Federal Income Tax
You are also required to pay federal income tax on any money you withdraw from your LLC. The amount of federal income tax you pay varies based on allowances and deductions, current income tax brackets, and your total earnings.
Employer and Employee Taxes for Your Washington DC LLC
If you have employees, there are a variety of taxes you will be required to pay. Talk to your accountant to get a clear picture of which employee and employer taxes apply to your Washington DC LLC.