Category: Business Tax Deductions, Credits, & Strategies

An LLC or Limited Liability Company is a business structure designed to separate the LLC’s members from the company’s debts and liabilities. Since 1997, when the IRS adopted the rule that businesses organized as Limited Liability Companies could choose to be taxed as corporations or partnerships, LLCs have increasingly become the corporate structure of choice for small businesses.

Tax Extensions for Single Member LLC’s

The member of a Single member LLC is not required to file a separate business tax return for their LLC. Profits and Losses from their LLC are reported on Schedule C of the personal tax return they file on IRS Form 1040. Of note, the fact that the LLC has an Employer Identification Number (EIN) has no impact on this.

Tax returns for taxpayers who own and operate single member LLCs are typically due on April 15th. If the taxpayer needs additional time to file, they should file a Personal Online Tax Extension or the paper version of IRS Form 4868 and mail it via the U.S. Postal Service. Please note that with paper Form 4868, the IRS never acknowledges receipt or approval of your tax extension. They will only notify you, via the U.S. Mail, if your extension was rejected. Typically this notification will be long after the tax filing deadline has already passed and late filing and late payment penalties have already kicked in.

Tax Extensions for Multi Member LLC’s

Multi-member LLC, as the term implies, is a business structure where there is more than one member. By default, the IRS treats Multi-member LLCs as partnerships but does allow the LLC to elect to be taxed as a corporation by filing IRS Form 8832, Entity Classification Election. In either event, both LLCs treated as partnership returns, filed on IRS Form 1065 and LLCs treated as corporations, filed on IRS Form 1120S, are due on the 15th day of the 3rd month following the end of the tax year, typically March 15th. To extend the LLC filing date by six (6) months, file a Business Online Tax Extension or the paper version of IRS Form 7004 and mail it via the U.S. Postal Service. As with Form 4868, the IRS will never acknowledge receipt of approval of your LLC tax extension. They will only notify you, via U.S. Mail, if your extension has been rejected, typically long after the filing deadline when late filing and payment penalties have already been triggered.

More times than not, when a Multi Member LLC files an extension, the LLC is unlikely to generate its Member’s K-1 forms in time for them to file their tax returns. It is important to remember that the LLC’s tax extension does not flow through to the individual members and that those members will need to file a Personal Online Tax Extension or the paper version of IRS Form 4868.

Tax Extensions for Multi-Member LLCs with Two Members who are a Married Couple

Multi-member LLCs who’s only members are a married couple are still treated as such EXCEPT if they live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas or Wisconsin, as of this writing) where they are treated as single member LLC’s by the IRS. Married couples should follow the rules outlined above depending on whether they live in a community property state or not. Regardless of what state the couple lives in, if the LLC has filed IRS Form 8832 and elected treatment as a corporation, they are treated as a corporation.

State Tax Extensions for LLCs

The question of whether and what type of extension you need to file with the tax extension for your LLC has several determining factors including what state you operate in and the type of LLC you have, as described above. Please consult our State Tax Extension guides to determine what, if anything, you need to file with your state.

Important: All tax extensions extend your due date for filing your return. They do not grant an extension of time to pay any taxes due. To avoid late payment penalties, it’s important to estimate what your tax liability, if any, will be for the tax year and send in at least 90% of what you ultimately owe when you file your tax extension.

 

 

Overview

An S-Corporations is an entity where a corporation’s profit or loss is “passed through” and are reported on the tax returns of the underlying shareholders. Even though the tax liability is passed to the individual shareholders, the S corp is required to file a tax return each year on IRS Form 1120S, which includes attaching Schedule K-1 that reports the profit or loss for each shareholder of the S corp.

S-Corp Tax Return Deadline (IRS Form 1120S)

S-Corporation tax returns are due no later than the 15th day of the third month following the end of the corporation’s tax year. For calendar year filers, this is March 15th or the first Monday after March 15th, in years that it falls on a weekend.

S-Corp Tax Extensions

In the event an S-Corporation is unable to file IRS Form 1120S by the filing deadline, it can file IRS Form 7004 to obtain an automatic six-month extension. Taxpayers can File an S-Corp Tax Extension Online, where the taxpayer will receive electronic notification of approval or notification of rejection in a matter of minutes, or they may complete, print and mail IRS Form 7004 in paper form. In this case, the IRS never acknowledges receipt and approval of the extension but will send notification via the United States Postal Service, when an extension has been rejected, more often than not, long after the filing deadline has past and late filing penalties have already been triggered.

S-Corp Late Filing Penalities 

The penalty for not filing either IRS Form 1120S or IRS Form 7004 by the due date is $195 per full or part of the month the return is late multiplied by the total number of shareholders of the S-Corporation. Since the maximum number of shareholders in an S-Corp is 100, the maximum late filing penalty that the IRS can impose is $19,500 per full or part of a month that the return is late, assuming 100 shareholders.

Common S-Corp Tax Extension Mistakes 

S-Corporations are more accurately described as C-Corporations who have made, what is commonly referred to as, an “S election” with the IRS. An S election is made by filing IRS Form 2553, Election by a Small Business Corporation that allows the corporation to pass through any profits or losses to its underlying shareholders. It is very common for taxpayers to either mistakenly believe that the IRS recognizes their corporation as an S-Corp when the company has either failed to file IRS Form 2553 or the IRS has not yet approved the S-Corp election. Taxpayers who file IRS Form 7004 stating that they are filing for an S-Corp as an entity type, who have either not filed Form 2553 or have not been approved as an S Corp, will have their tax extensions rejected by the IRS because of an incorrect entity type. To rectify this, ideally, the taxpayer should call the IRS or their tax accountant and speak with them about the status of their S-Corp election. Unfortunately, more often than not, corporate tax extensions are filed very close to the filing deadline, so there is little time to resolve the situation. In those case, the taxpayer can elect to file their extension with an entity type of a C-Corporation so that the tax extension is approved and then address the S Corp election with the IRS.

It is also often overlooked that when an S-Corporation is filing an extension, it generally means that the underlying shareholders will not have their K-1’s in time to file their personal tax returns and those shareholders will also need to file IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return. As with a Business Tax Extension, taxpayers can File a Personal Tax Extension Online or print and mail IRS Form 4868 in paper form. Again, In this case, the IRS never acknowledges receipt and approval of the extension but will send notification via the United States Postal Service, when an extension has been rejected, more often than not, long after the filing deadline has past and late filing penalties and interest charges have already been triggered.