The Business Taxes Payable by Your New Jersey LLC
There’s a wide variety of business taxes that your New Jersey LLC will need to pay. These include tax that’s payable to the New Jersey government, like New Jersey sales taxes and New Jersey 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 New Jersey LLC Will Be Taxed
The profits of a New Jersey LLC are not taxed at the business level, like those of C Corporations. Instead, tax for a New Jersey LLC works as follows:
New Jersey LLC owners pay self-employment tax on business profits
New Jersey LLC owners pay NJ 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 NJ LLCs pay New Jersey 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 New Jersey personal tax returns, and that’s where you will pay those taxes.
New Jersey Taxes Payable to the NJ Division of Taxation
There are two main types of tax that you will pay to the New Jersey Division of Taxation: New Jersey state income tax and New Jersey state sales tax.
New Jersey State Tax on Your LLC Earnings
As a New Jersey business owner, you will need to pay NJ state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay New Jersey income tax. You will be taxed at the standard rates for New Jersey state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal New Jersey state taxes. New Jersey tax rates vary widely depending on income.
Your New Jersey LLC and NJ Sales Taxes
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 NJ Division of Taxation. New Jersey sales tax is collected at the point of purchase. New Jersey sales tax rates do vary depending on the region, county or city where you are located.
You will typically need to collect New Jersey sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
- Certain services that your New Jersey business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
New Jersey 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. Here are the sales tax rates for the major cities in New Jersey:
- Newark: 6.875 percent
- Jersey City: 6.875 percent
- Edison: 6.875 percent
- Parsippany-Troy Hills: 6.875 percent
Federal Self-Employment and Income Taxes for Your New Jersey LLC
There are a couple different federal taxes that every LLC will need to pay, including New Jersey LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
New Jersey LLC Federal Self-Employment Tax
All New Jersey 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 New Jersey 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 $50,000, you would pay self-employment tax of $7,650
- On profits of $80,000, you would pay self-employment tax of $12,240
- On profits of $120,000, you would pay self-employment tax of $18,360
- On profits of $160,000, you would pay self-employment tax of $24,480
Pay Less Self-Employment Tax by Treating Your New Jersey 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 New Jersey LLC self-employment tax through an S Corporation tax election.
New Jersey LLC Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your New Jersey 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 New Jersey 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 New Jersey 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.
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.
You may also choose to withhold federal and New Jersey state income tax on the wages you pay to employees. Speak to your accountant for more information.
Regardless of whether you withhold federal and New Jersey state income tax, your employees may need to file their own tax returns.
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.
Depending on the industry you are in, your New Jersey 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.
Most New Jersey 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 taxes are:
- Federal income tax
- Federal self-employment tax
- New Jersey state tax
Most New Jersey LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on New Jersey LLC Business Taxes
Yes. New Jersey does have a sales tax, which may vary among cities and counties. You can find more information above.
No, New Jersey does not have a general state income tax.
Yes. In most cases you must pay estimated taxes for your federal income tax and self-employment tax. Speak to your accountant for more information.
Yes. In most cases you must pay estimated taxes on your New Jersey tax, federal income tax and self-employment tax. Speak to your accountant for more information.