Connecticut Business Taxes for Your LLC
There are a wide variety of business taxes that your Connecticut LLC will need to pay. These include tax that’s payable to the Connecticut government, like Connecticut sales taxes and Connecticut state tax. You will also need to pay federal, self-employment and possibly payroll tax to the IRS.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Connecticut LLC Will Be Taxed
The profits of a Connecticut LLC are not taxed at the business level like those of C Corporations. Instead, taxes for a Connecticut LLC work as follows:
Connecticut LLC owners pay self-employment tax on business profits
Connecticut LLC owners pay CT state tax on any profits, less state allowances or deductions
All LLC owners pay federal income tax on any profits less federal allowances or deductions
Some CT LLCs pay Connecticut sales tax on products
Employers pay payroll tax on any salaries they pay to employees
Employees pay federal, state and payroll tax on their earnings
Items 1, 2 and 3 are taxed as “pass-through” income for any LLC owners, managers or members who receive profits from the business. Any profits are reported on federal and Connecticut personal tax returns, and that’s where you will pay those taxes.
Connecticut Taxes Payable to the CT Department of Revenue Services
There are two main types of tax that you will pay to the Connecticut Department of Revenue Services: Connecticut state income tax and Connecticut state sales tax.
State Taxes in Connecticut
As a Connecticut business owner, you will need to pay CT state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay Connecticut income tax. You will be taxed at the standard rates for Connecticut state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal Connecticut state taxes.
The Connecticut state tax rate varies between 3 and 6.99 percent, depending on how much you earn.
CT Sales Taxes and Filing for LLCs
If you sell physical products or certain types of services, you may need to collect sales tax (also known as sales and use tax) and then pay it to the CT Department of Revenue Services. Connecticut sales tax is collected at the point of purchase. Connecticut sales tax rates do vary depending on the region, county or city where you are located. Get details of the CT state tax here.
You will typically need to collect Connecticut sales tax on:
Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
Certain services that your Connecticut business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
Get details on the Connecticut sales tax online here.
Getting a State Tax ID for Connecticut
You will need a tax registration number to pay CT taxes. You can get this by registering your business online.
Connecticut Sales Tax Rates
Sales tax rates do vary between states, counties and cities. Typically, the state will set a base sales tax rate, then specific counties and cities may levy small additional sales tax amounts on top of that.
Federal Self-Employment and Income Taxes for Your Connecticut LLC
There are a couple different federal taxes that every LLC will need to pay, including Connecticut LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
Connecticut LLC Federal Self-Employment Tax
All Connecticut LLC business members or managers who take profits out of the LLC will need to pay self-employment tax. This tax is also known as FICA, Social Security or Medicare tax. It applies to all the earnings you withdraw from your Connecticut business. The current self-employment tax rate is 15.3 percent.
You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
On profits of $100,000, you would pay self-employment tax of $15,300
On profits of $120,000, you would pay self-employment tax of $18,360
On profits of $140,000, you would pay self-employment tax of $21,420
On profits of $160,000, you would pay self-employment tax of $24,480
Pay Less Self-Employment Tax by Treating Your Connecticut LLC as an S Corporation
The Internal Revenue Service allows LLCs to ask to be treated as an S Corporation for tax purposes. This can help you reduce the amount of self-employment tax that you pay by declaring some of your income as salary and other income as distributions or withdrawals.
You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.
Incfile Form 2553 S Corporation Tax Election for an LLC service
Speak to your accountant for more information on reducing your Connecticut LLC self-employment tax through an S Corporation tax election.
Connecticut LLC Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your Connecticut LLC. The amount of income tax you pay depends on your earnings, current income tax brackets, deductions and how you file.
You only pay federal income tax on your Connecticut LLC profits that you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus LLC business expenses and other deductions for areas such as healthcare and some retirement plans. Speak to your accountant for more information.
Employer and Employee Taxes for Your Connecticut LLC
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.
Employer Payroll Tax Withholding for Your Connecticut LLC
All employers must collect and withhold payroll tax from their employees when they receive their salaries. You would normally withhold 7.65 percent of the taxable salary that you pay to your employees.
Employer Federal and State Tax Withholding for Your Connecticut LLC
You may also choose to withhold federal and Connecticut state income tax on the wages you pay to employees. Speak to your accountant for more information.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal and Connecticut state income tax, your employees may need to file their own tax returns.
Connecticut LLC Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, like employee compensation insurance or unemployment tax. There will also be other requirements you have for employees.
Get more requirements from the Connecticut Department of Labor website.
Other Taxes and Duties for Your Connecticut LLC
Depending on the industry you are in, your Connecticut LLC may be liable for certain other taxes and duties. For example, if you sell gasoline you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods, you may need to pay certain duties. Speak to your accountant about any other taxes you may need to withhold or pay.
Estimated Taxes for Your Connecticut LLC
Most Connecticut LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are:
Most Connecticut LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Connecticut LLC Business Taxes
Does Connecticut Have Sales Tax?
Yes. Connecticut does have a sales tax, which may vary among cities and counties. You can find more information above.
Does Connecticut Have a State Tax?
Yes. Connecticut does have a general state income tax. You can find more information above.
Do I Need to Pay Estimated Taxes?
Yes. In most cases you must pay estimated taxes on your Connecticut tax, federal income tax and self-employment tax. Speak to your accountant for more information.