by Richard A. Chapo
Yes, the tax season is upon with the first filing date for
some businesses being March 15, 2005. If you can't imagine
getting your tax returns together by that date, you need not
worry. The IRS automatically gives you an extension if your
file the appropriate form. As you might expect, there are
different forms for different businesses.
An Important
Note
It is vitally important that you understand that
an extension to file taxes is not an extension to PAY taxes.
The IRS will give you a break on the filing date, but it wants
the money now! If you anticipate that you will owe taxes, you
need to send in the appropriate payment. Failure to do so
could result in interest charges when you eventually get
around to filing your returns.
Corporations
If
you conduct business as a corporation with a fiscal year-end
of December 31st, you are required to file your 2004 tax
returns on or before March 15, 2005. You can get an automatic
extension, however, by filing form 7004 before the March 15
deadline. Form 7004 applies both to "C" and "S" corporations
and grants you an automatic 6-month extension to September 15,
2005.
While this automatic extension applies to "S"
corporations, you should be aware of a quirk in the tax code.
Since "S" corporations "pass through" taxes to your personal
returns, the six-month extension is really only a five-month
extension. To file your personal tax returns, you must report
information from the K-1 issued from the "S" corporation.
Unfortunately, the IRS only grants automatic extensions for
filing personal tax returns to August 15, 2005.
Limited Liability Company
The IRS has never
really figured out to how to handle limited liability
companies. It has settled on a policy of avoiding the issue
and simply treating the entity as a corporation or
partnership.
Limited liability companies with more
than one owner typically elect to be treated as partnerships
for tax purposes. If this describes your situation, the LLC is
required to file tax returns by April 15, 2005. You can obtain
a 3-month extension by filing form 8736. Although form 8736
contains language regarding partnerships, you will still use
this form since the IRS classifies you as a partnership for
tax purposes.
If you are the sole owner of an LLC, you
may be in for a surprise. The IRS doesn't recognize LLCs owned
by one person. Instead, it simply considers you a sole
proprietor and the rules for sole proprietorships apply. These
are discussed below.
Partnership
If your
business is a partnership, you are required to file tax
returns by April 15, 2005. You can use form 8736 to obtain a
3-month extension.
Self-Employed/Sole-Proprietor
If you are not
using a business entity, your business tax information should
be reported on your personal tax return. The due date for
filing your personal tax returns is April 15, 2005. You can
obtain a four-month extension by filing form 4868.
Summary
Regardless of how your business is
organized, the IRS will automatically grant you an extension
to file your tax returns. By sending in the appropriate form,
you can avoid a mad rush that will inevitably result in
missing deductions and overpaying your taxes. Just make sure
you pay any taxes you anticipate owing by the appropriate
date.
