Federal Tax Update: New Rules for Employment Tax Payments by Single Member LLCs


by McGrath North Tax Group

(402) 341-3070

For wages paid before January 1, 2009, single member LLCs that did not elect to be taxed like a corporation, were able to report and pay employment taxes using either the name and EIN assigned to the LLC or the name and EIN of the single member.

Under regulation changes effective in 2009, employment taxes must be reported and paid in the name and EIN of the single member LLC. Employment taxes may not be reported and paid using the name and EIN of the single member.

The regulation changes are not retroactive. The owner of a single member LLC remains responsible for paying employment taxes on wages paid before January 1, 2009 and the LLC becomes responsible for paying employment taxes on wages paid beginning January 1, 2009.

This change means that a single member LLC is now treated as an entity separate from its owner for purposes of employment and certain excise taxes. This change does not mean that the single member is an employee of the LLC for purposes of employment tax, because the LLC is still treated as a sole proprietorship (i.e., a disregarded entity) for income tax purposes. The single member would still be liable for self-employment tax on his or her earnings with respect to the LLC’s activities, the same as before the change.

A single member LLC may secure an EIN by applying at www.irs.gov or by filing Form SS-4, Application For Employer Identification Number, with the IRS.

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