Tax returns for partnerships and S-corps that pay on a calendar year are due this Friday, March 15th. C-corps have an additional month to complete and file their returns (those are due on the April 15th tax deadline). Are you ready to file? If the answer is no, you need to file an extension, which will give you an extra six months to complete your return.
First, let’s take a look at what you’re responsible for filing by March 15th, and then we’ll talk about what you can do if you’re not ready to file by the deadline.
What tax return is due March 15th?
As you probably know, partnerships (e.g. LLCs, LLPs, General Partnerships, etc.) and S-corps don’t pay tax on their profits in the way that a C-corp does—the owner(s) or partners report the income on their individual tax returns and pay income tax based on their individual tax brackets. S-corps and partnerships are known as pass-through entities because the tax burden passes through to the owner’s individual tax return.
However, there’s still paperwork to complete for the corporation to report its income, gains, losses, deductions, and credits—Form 1065 for partnerships or Form 1120-S for S-corps. These are the forms that are due by March 15th. Your income tax payment isn’t due quite yet, but any tax your state collects (e.g. minimum tax, franchise tax, etc.) is due by the March 15th deadline.
An extension does NOT give you an extra six months to pay any tax due.
Delaying payment of taxes is one of the biggest and most costly mistakes we see business owners making every year. It’s critical to be aware of your state’s requirements. If you are planning to file an extension and know that you owe taxes, you must pay the amount you owe by the March 15th deadline.
If you file an extension and fail to pay any tax due, you may face interest, fines, and penalties. If your extension or filed return is late, the IRS is likely to invalidate your extension. For pass-through entities, the penalties are assessed per partner per month and can be quite costly.
How do I file a business tax extension?
Business entity returns can use Federal Form 7004 to request an extension of time for filing your return. Because pass-through entities do not typically owe tax at a Federal level, you’ll enter zero for Line 6-Tentative Tax. We will have another quick blog closer to the April 15th deadline, which will address extending C-corporation and individual tax returns. Those extensions typically will require payment if withholdings and estimates are insufficient. If you already know that you’re going to owe tax and plan to file an extension for the April 15th deadline, start preparing to pay what you owe.
If you’re mailing your extension, we recommend sending via certified mail, so you have proof of the mailing date. If you’re e-filing, print the acceptance notice you receive in order to maintain a record that your extension was filed on time.
There are some states that automatically accept the federal extension if no payment is required. However, there are exceptions to every rule, so it’s important to be aware of the regulations for your specific state. Also, the same rules apply when it comes to paying your state tax on time—if you’re going to owe in your state, pay the balance by the deadline, even if you’re filing an extension.
Don’t wait until the last minute! If you already know you won’t make the tax return deadline, file Form 7004 as soon as you can. Contact us if you have questions or need help with your tax returns this year.