Note: Our tax lesson is not as step-by-step as our other forming an LLC in New Mexico lessons, due to the uniqueness and variation among businesses in the state. Taxes are usually not as straightforward as forming an LLC in New Mexico, and therefore, the information below is an overview, and not a comprehensive guide.
You will most likely need to hire a tax professional to make sure you meet all your New Mexico state and local tax obligations. We recommend using Thumbtack.
Do it yourself in New Mexico
Tax Help is a free service for people whose household income is $54,000 every year or less or those who are 65 years or older: Tax Help New Mexico
Depending on your industry, where your business is located, how you are taxed by the IRS, and whether or not you have employees, will determine which additional taxes and forms are due.
Some examples of other taxes and forms due are:
- Sales and use tax
- Property tax
- Local taxes
- Personal income tax
- Excise tax
- Pass-through entity tax
- Gross receipts tax
- Wage withholding tax
- Compensating tax
- Corporate income & franchise tax
- Workers’ compensation
- Alternative fuel tax
- Boat excise tax
- Oil, natural gas, and mineral extraction tax
- Motor vehicle tax
- Monthly alcohol beverage excise tax report
- Monthly cigarette stamps distribution report
- Monthly combined reporting system distribution matrix
- And more
Federal Taxes with the IRS
By default, single-member LLCs are taxed as Sole Proprietorships by the IRS, and by default, multi-member LLCs are taxed as Partnerships by the IRS. The bulleted list above refers to state and local taxes, not federal taxes filed with the IRS. Remember, the income/losses from your LLC will “flow through” to your personal 1040 tax return on a Schedule C, as well as additional Schedules depending on how you derive your income.
Tip: The above language really confuses a lot of people. Notice that we said “taxed as”. This means, in the eyes of the law, your LLC is still a separate legal entity from you, but the IRS is treating your LLC differently (just for tax purposes). Technically, your LLC is still an “LLC legal entity” with the state and the law, but your LLC is a “tax entity” (either a Sole Proprietorship or Partnership) with the IRS.
Additionally, your tax professional may recommend that your LLC be taxed as a Corporation with the IRS. In that case, your LLC can be taxed as a C-Corp or your LLC can be taxed as an S-Corp. You’ll need to discuss this with your tax professional though, as this usually only works for certain types of businesses, and those businesses that are making close to (or over) $100,000 per year.
Calculating your tax obligations in New Mexico (and with the IRS) can be complicated and if done improperly can negatively impact your LLC.
Hiring a tax professional will not only help you keep your New Mexico LLC in compliance, but it will also give you an advisor to go to for other business questions.
You’ll want someone who’s a good fit for your company, makes you feel comfortable, and is willing to answer all of your questions. It should be someone you like personally as well as professionally. We recommend talking with at least 2-3 people before making your final decision.