#20: September 16th Filing Deadline- Are you ready?
September 16th is the filing deadline for S-Corporations and Partnerships that filed for a 6-month extension. In this episode we'll discuss what creates those entities, some options if yours may be late, and a few other nuances to make this week a little easier.
Facebook Group For Tax Professionals
Facebook Group For Real Estate Investors
IRS List of Qualified Disaster Areas
Rev-Proc 84-35
Introduction to the September 15th (16th) Deadline
[00:00:00] Hello. Hello everyone. And welcome to today's show. So we are only a few days away from the extended deadline for entity tax returns. This deadline specifically applies to pass-through entities, which typically include partnerships and S-Corporations. Normally, this deadline is September 15th, but this year, because the 15th falls on a weekend, the deadline is technically extended to Monday, September 16th. While this is the extended deadline for entities, keep in mind that the extended personal tax return deadline remains October 15th.
---
Entities Affected by the Deadline
[00:00:37] Today’s show is going to focus on the September 15th (16th) deadline—who it applies to, common misconceptions about it, and what your options are if you think you might miss this deadline. To start, this deadline applies to S-Corporations and partnerships, both of which are pass-through entities. These tax returns are typically due on March 15th. However, if you filed for an extension, you were granted an additional six months to file, pushing the deadline to September 15th (or 16th this year). It’s important to note that an extension to file does not mean an extension to pay any taxes owed, just like with your personal return.
---
Recap: What Are S-Corps and Partnerships?
[00:01:18] Let’s quickly recap what qualifies as an S-Corporation or a partnership. Many people may not even realize that they have one of these entities. An S-Corporation is either a C Corporation that has elected to be taxed as an S-Corp or an LLC that has chosen to be taxed as an S-Corp. To make this election, you would file Form 2553. You don’t need to change your LLC into a corporation first—it’s a single step to make this election. On the other hand, partnerships are formed in various ways, but they typically involve more than one person operating the business. Even without a formal entity, if more than one person is involved, you may have created a partnership.
---
Understanding Partnerships: Common Situations
[00:02:28] The other common type of entity that is affected by this deadline is partnerships. Partnerships can be formed in a variety of ways, but the most common is the general partnership, where more than one person operates a business, even without a formal legal entity. Additionally, any LLC with more than one member (a multi-member LLC) will generally be considered a partnership for tax purposes unless it has made a different tax election. This often surprises people, as they might set up an LLC and add a spouse or a business partner without realizing they’ve created a partnership, requiring them to file Form 1065, the partnership tax return. For example, if you and a friend create an LLC to invest in real estate and split the proceeds 50/50, you’ve inadvertently formed a partnership and must file the corresponding tax return.
---
When a Multi-Member LLC is a Partnership
[00:03:31] This situation is particularly common with multi-member LLCs. Often, people will set up an LLC and add their spouse to it, not realizing that in many states, they are now required to file a partnership return. Another frequent scenario occurs when individuals join forces for a small business venture, such as a real estate deal with a friend, where they both list themselves as owners on the LLC. Without knowing it, they’ve created a partnership and will need to file Form 1065. However, there is an exception for married couples in community property states: if the only members of the LLC are you and your spouse, and you live in a community property state, you may not have to file a partnership return at all. Instead, you might be able to treat the LLC as a disregarded entity.
---
Special Considerations for Married Couples in Community Property States
[00:04:27] If you are married and live in a community property state, and the only members of your multi-member LLC are you and your spouse, you might be able to treat the LLC as a disregarded entity, avoiding the need to file a partnership return. If you and your spouse are operating a business without any formal entity, you have the option of filing as a qualified joint venture. In this case, you would each report your share of the business income and expenses on separate Schedule C forms as part of your individual tax returns, instead of filing a partnership return. These are a few nuances where you might not be required to file a partnership return, but in most cases, having a multi-member LLC will necessitate filing Form 1065.
---
Filing Deadline for Entities: March 15th or Extended to September 15th
[00:05:00] Remember, if you have an S-Corp or partnership, your tax return is normally due on March 15th. If you file for an extension, you get an additional six months, pushing the deadline to September 15th (or in this year’s case, September 16th, since the 15th falls on a weekend). Even if you file for an extension, be aware that this doesn’t extend your time to pay any taxes owed. If you haven’t filed yet, or if you’re not ready, it’s crucial to get your return filed as soon as possible to avoid late filing penalties.
---
Importance of Filing on Time
[00:05:16] Even if you don’t have the money to pay right now, filing late and paying late is worse than just paying late. You should aim to file your S-Corp or partnership return by the September 16th deadline (or October 15th for personal returns), even if you can’t pay what you owe at the moment. Filing late can lead to significant penalties, so it’s always better to file on time and pay later if necessary. However, I understand that sometimes these things are unavoidable—whether it's because you didn’t realize you had a partnership, forgot to file an extension, or your books aren’t ready.
---
Solutions for Late Filing: Rev Proc 84-35 (Partnerships Only)
[00:06:00] If you think you might miss the deadline for filing your entity return, there are a few potential solutions depending on your circumstances. One option, specifically for partnerships (this does not apply to S-Corporations), is the IRS Rev Proc 84-35. If your partnership qualifies under this procedure, you can request relief from late-filing penalties. The small partnership exception under Rev Proc 84-35 allows penalties to be waived if the partnership meets certain criteria and the late filing was due to reasonable cause.
---
Rev Proc 84-35: Criteria for Penalty Relief
[00:07:00] Let’s go over the criteria to see if you qualify for penalty relief under Rev Proc 84-35. First, your partnership must have no more than 10 partners. Second, all partners must either be individuals or estates of deceased partners—no trusts, LLCs, or corporations as partners. Third, the allocation of income, deductions, and credits must be the same for all partners, and each partner must report their share of the partnership’s income or loss on their personal tax returns. This is why it’s important to complete your partnership return as soon as possible so that you can issue the K-1s to your partners and include them in their personal returns, which are due October 15th.
---
Timing and Rev Proc 84-35 Application
[00:09:00] If you can get your partnership return filed within the next few weeks, and if your partners report their income or losses on time, you can avoid the late filing penalty under Rev Proc 84-35. This procedure provides relief from the $235 per month, per partner penalty, as long as the criteria are met and all information is reported correctly on the partners' personal tax returns. Remember, this procedure does not apply to S-Corporations, and it varies by state whether you can also receive penalty relief at the state level. Be sure to consult your tax professional to confirm if you qualify.
---
Impact of Late Filing on Certain Tax Return Elections
[00:10:02] One important thing to note is that certain tax return elections must be made on a timely filed tax return. So even if you get your return filed late and manage to avoid the late filing penalty, you may miss out on certain tax elections that you would otherwise have been able to make. It’s critical to check with your tax professional to understand if any of these elections are impacted by the timing of your return.
---
Disaster Relief: Extended Deadlines Due to Qualified Events
[00:10:30] Another potential solution for late filing is disaster relief. This year, there were several natural disasters that affected filing deadlines. If you or your business is located in an area that was declared a disaster zone, you may qualify for an extension of time to file, potentially pushing your deadline out to February 3rd of next year. This relief applies to many areas across the country, including regions affected by hurricanes, flooding, mudslides, and other events.
---
Nuances of Disaster Relief Deadlines Based on Location of Tax Professional
[00:13:19] Some taxpayers assume that if their tax preparer is located in a disaster area, they automatically get an extended filing deadline, even if they themselves do not live in the affected area. This is not always the case. If your tax preparer holds all of your business records and is physically impacted by the disaster, you might have an argument for an extension. However, if you simply upload your records to a portal and the preparer
is not directly handling your paperwork, it’s less likely that you’ll qualify. Be sure to check with the IRS to confirm whether you qualify for the disaster relief extension.
---
S-Corps and Partnerships: Franchise Tax vs. Income Tax
[00:15:00] A final point to consider for S-Corporations and partnerships is that some states have both a franchise tax and an income tax. A common example is California, where businesses are required to file and pay a franchise tax regardless of whether or not the entity has any income. Many people assume that if their business isn’t generating income, they don’t need to file, but this isn’t the case. Filing late or failing to file can result in additional penalties, so be sure to check your state’s requirements and make sure you are in compliance.
---
Closing Remarks
[00:16:35] That’s what I have for you all today. I wanted to keep it short and sweet because I know a lot of people are rushing to meet this deadline. Hopefully, this helps clarify some common questions and concerns about the September 15th deadline for pass-through entities, particularly partnerships and S-Corporations. Be sure to reach out to your tax professional if you have specific questions or if you’re uncertain about your situation. Thanks for listening, and good luck!
Facebook Group For Tax Professionals
Facebook Group For Real Estate Investors
IRS List of Qualified Disaster Areas
Rev-Proc 84-35
Introduction to the September 15th (16th) Deadline
[00:00:00] Hello. Hello everyone. And welcome to today's show. So we are only a few days away from the extended deadline for entity tax returns. This deadline specifically applies to pass-through entities, which typically include partnerships and S-Corporations. Normally, this deadline is September 15th, but this year, because the 15th falls on a weekend, the deadline is technically extended to Monday, September 16th. While this is the extended deadline for entities, keep in mind that the extended personal tax return deadline remains October 15th.
---
Entities Affected by the Deadline
[00:00:37] Today’s show is going to focus on the September 15th (16th) deadline—who it applies to, common misconceptions about it, and what your options are if you think you might miss this deadline. To start, this deadline applies to S-Corporations and partnerships, both of which are pass-through entities. These tax returns are typically due on March 15th. However, if you filed for an extension, you were granted an additional six months to file, pushing the deadline to September 15th (or 16th this year). It’s important to note that an extension to file does not mean an extension to pay any taxes owed, just like with your personal return.
---
Recap: What Are S-Corps and Partnerships?
[00:01:18] Let’s quickly recap what qualifies as an S-Corporation or a partnership. Many people may not even realize that they have one of these entities. An S-Corporation is either a C Corporation that has elected to be taxed as an S-Corp or an LLC that has chosen to be taxed as an S-Corp. To make this election, you would file Form 2553. You don’t need to change your LLC into a corporation first—it’s a single step to make this election. On the other hand, partnerships are formed in various ways, but they typically involve more than one person operating the business. Even without a formal entity, if more than one person is involved, you may have created a partnership.
---
Understanding Partnerships: Common Situations
[00:02:28] The other common type of entity that is affected by this deadline is partnerships. Partnerships can be formed in a variety of ways, but the most common is the general partnership, where more than one person operates a business, even without a formal legal entity. Additionally, any LLC with more than one member (a multi-member LLC) will generally be considered a partnership for tax purposes unless it has made a different tax election. This often surprises people, as they might set up an LLC and add a spouse or a business partner without realizing they’ve created a partnership, requiring them to file Form 1065, the partnership tax return. For example, if you and a friend create an LLC to invest in real estate and split the proceeds 50/50, you’ve inadvertently formed a partnership and must file the corresponding tax return.
---
When a Multi-Member LLC is a Partnership
[00:03:31] This situation is particularly common with multi-member LLCs. Often, people will set up an LLC and add their spouse to it, not realizing that in many states, they are now required to file a partnership return. Another frequent scenario occurs when individuals join forces for a small business venture, such as a real estate deal with a friend, where they both list themselves as owners on the LLC. Without knowing it, they’ve created a partnership and will need to file Form 1065. However, there is an exception for married couples in community property states: if the only members of the LLC are you and your spouse, and you live in a community property state, you may not have to file a partnership return at all. Instead, you might be able to treat the LLC as a disregarded entity.
---
Special Considerations for Married Couples in Community Property States
[00:04:27] If you are married and live in a community property state, and the only members of your multi-member LLC are you and your spouse, you might be able to treat the LLC as a disregarded entity, avoiding the need to file a partnership return. If you and your spouse are operating a business without any formal entity, you have the option of filing as a qualified joint venture. In this case, you would each report your share of the business income and expenses on separate Schedule C forms as part of your individual tax returns, instead of filing a partnership return. These are a few nuances where you might not be required to file a partnership return, but in most cases, having a multi-member LLC will necessitate filing Form 1065.
---
Filing Deadline for Entities: March 15th or Extended to September 15th
[00:05:00] Remember, if you have an S-Corp or partnership, your tax return is normally due on March 15th. If you file for an extension, you get an additional six months, pushing the deadline to September 15th (or in this year’s case, September 16th, since the 15th falls on a weekend). Even if you file for an extension, be aware that this doesn’t extend your time to pay any taxes owed. If you haven’t filed yet, or if you’re not ready, it’s crucial to get your return filed as soon as possible to avoid late filing penalties.
---
Importance of Filing on Time
[00:05:16] Even if you don’t have the money to pay right now, filing late and paying late is worse than just paying late. You should aim to file your S-Corp or partnership return by the September 16th deadline (or October 15th for personal returns), even if you can’t pay what you owe at the moment. Filing late can lead to significant penalties, so it’s always better to file on time and pay later if necessary. However, I understand that sometimes these things are unavoidable—whether it's because you didn’t realize you had a partnership, forgot to file an extension, or your books aren’t ready.
---
Solutions for Late Filing: Rev Proc 84-35 (Partnerships Only)
[00:06:00] If you think you might miss the deadline for filing your entity return, there are a few potential solutions depending on your circumstances. One option, specifically for partnerships (this does not apply to S-Corporations), is the IRS Rev Proc 84-35. If your partnership qualifies under this procedure, you can request relief from late-filing penalties. The small partnership exception under Rev Proc 84-35 allows penalties to be waived if the partnership meets certain criteria and the late filing was due to reasonable cause.
---
Rev Proc 84-35: Criteria for Penalty Relief
[00:07:00] Let’s go over the criteria to see if you qualify for penalty relief under Rev Proc 84-35. First, your partnership must have no more than 10 partners. Second, all partners must either be individuals or estates of deceased partners—no trusts, LLCs, or corporations as partners. Third, the allocation of income, deductions, and credits must be the same for all partners, and each partner must report their share of the partnership’s income or loss on their personal tax returns. This is why it’s important to complete your partnership return as soon as possible so that you can issue the K-1s to your partners and include them in their personal returns, which are due October 15th.
---
Timing and Rev Proc 84-35 Application
[00:09:00] If you can get your partnership return filed within the next few weeks, and if your partners report their income or losses on time, you can avoid the late filing penalty under Rev Proc 84-35. This procedure provides relief from the $235 per month, per partner penalty, as long as the criteria are met and all information is reported correctly on the partners' personal tax returns. Remember, this procedure does not apply to S-Corporations, and it varies by state whether you can also receive penalty relief at the state level. Be sure to consult your tax professional to confirm if you qualify.
---
Impact of Late Filing on Certain Tax Return Elections
[00:10:02] One important thing to note is that certain tax return elections must be made on a timely filed tax return. So even if you get your return filed late and manage to avoid the late filing penalty, you may miss out on certain tax elections that you would otherwise have been able to make. It’s critical to check with your tax professional to understand if any of these elections are impacted by the timing of your return.
---
Disaster Relief: Extended Deadlines Due to Qualified Events
[00:10:30] Another potential solution for late filing is disaster relief. This year, there were several natural disasters that affected filing deadlines. If you or your business is located in an area that was declared a disaster zone, you may qualify for an extension of time to file, potentially pushing your deadline out to February 3rd of next year. This relief applies to many areas across the country, including regions affected by hurricanes, flooding, mudslides, and other events.
---
Nuances of Disaster Relief Deadlines Based on Location of Tax Professional
[00:13:19] Some taxpayers assume that if their tax preparer is located in a disaster area, they automatically get an extended filing deadline, even if they themselves do not live in the affected area. This is not always the case. If your tax preparer holds all of your business records and is physically impacted by the disaster, you might have an argument for an extension. However, if you simply upload your records to a portal and the preparer
is not directly handling your paperwork, it’s less likely that you’ll qualify. Be sure to check with the IRS to confirm whether you qualify for the disaster relief extension.
---
S-Corps and Partnerships: Franchise Tax vs. Income Tax
[00:15:00] A final point to consider for S-Corporations and partnerships is that some states have both a franchise tax and an income tax. A common example is California, where businesses are required to file and pay a franchise tax regardless of whether or not the entity has any income. Many people assume that if their business isn’t generating income, they don’t need to file, but this isn’t the case. Filing late or failing to file can result in additional penalties, so be sure to check your state’s requirements and make sure you are in compliance.
---
Closing Remarks
[00:16:35] That’s what I have for you all today. I wanted to keep it short and sweet because I know a lot of people are rushing to meet this deadline. Hopefully, this helps clarify some common questions and concerns about the September 15th deadline for pass-through entities, particularly partnerships and S-Corporations. Be sure to reach out to your tax professional if you have specific questions or if you’re uncertain about your situation. Thanks for listening, and good luck!
