A Business Tax Extension is only available for LLCs that have elected to be taxed as partnerships or corporations. Partnerships and corporations file tax returns, which are referred to as 'Returns.'
In this article, you will find out what an LLC is, how it has been classified, and which tax extensions are available to each one.
An Overview of the LLC Structure
The basic concept behind the LLC is to create a barrier between what you personally own and your business assets. As such, you are only liable for the debts and liabilities of your business to the extent that they exceed what you own.
The LLC has been classified by the IRS as a "pass-through" entity, meaning that it does not pay tax on business income.
Instead, all profits and losses of the LLC pass through to the individual members, who report them on their personal returns.
There are several different types of LLCs, and some allow you to choose which type of tax structure you want.
As far as IRS Tax Extensions are concerned, there are three primary sorts of LLCs:
- Single Member LLC
- Multi Member LLC as a partnership
- Multi-Member LLC as a Corporation ( S Corporation or C Corporation)
LLC Business Tax Extension
A business tax extension allows you to extend the time to file a business return. Usually, an LLC's tax return is due on the 15th day of the fourth month following the close of its fiscal year. If your LLC has not quite reached three months in age and has no assets or revenues, then you might qualify for a business tax extension.
Tax Extension for Single Member LLC treated as Sole Proprietorship
If you choose to file as a single-member LLC and your business tax return is due by the 15th day of the fourth month after fiscal year-end, then you can file for an automatic tax extension.
Unless the single-member LLC chooses to be taxed as a corporation, it is generally ignored for federal tax purposes, with the exception of the following situations:
- If a single-member LLC is the only member and all of their income and expenses from businesses are accounted for as a single-member LLC on Form 1040, it must be reported.
Tax Extension for Single Member LLC treated as Corporation or Partnership
If the single-member LLC is treated as a corporation, then there is no tax extension available.
If the single-member LLC files with the IRS as either a partnership or corporation, then you will automatically receive an automatic tax extension. This tax extension will allow you to file your tax return any time between August 16 and October 15.
Tax Extension for Multi-Member Llcs Treated as a Partnership
Multi-member LLC that files for tax treatment as a partnership LLC can file an automatic extension of time through the IRS. This automatic six-month extension is until March 15th of the following tax year.
If you need more time, you may request up to another three-month tax extension by filing Form 7004 before October 15th.
In general, LLC members participating in partnership returns are required to pay self-employment taxes in order to document their share of any profits generated by the firm.
They must also indicate their pro-rata part of business income, credits, and deductions on Schedule K-1 of Form 1065.
Tax Extension for Multi-Member LLCs treated as a Corporation
If you have a multi-member LLC and choose to tax the business as a corporation, then you will automatically receive an automatic extension of time. The tax extension will allow you to file your return any time between August 16 and October 15th.
In general, when treating your LLC as a corporation for tax purposes, you should still file an LLC return to report the profits and losses of the business in order to avoid tax liability.
If the MultiMember LLC is a corporation, it must file Form 1120, U.S. Corporation Income Tax Return, the C corporation income tax return.
However, if a qualifying LLC entity is chosen to be taxed an S Corporation, it must complete Form 1120S, the U.S. Income Tax Return for an S Corporation. The company's rules and regulations would apply.
On Schedule K-1 (Form the 1120S), each owner must report their proportionate share of corporate income, credits, deductions, gains, losses, and tax items. The return deadline for an S Corporation is March 15th of the following tax year.
How To File an Extension for LLC?
Because many businesses, regardless of whether they are LLCs or other legal entities, do not have their books and records completed in time to file an accurate return on time, they miss out on the opportunity to take advantage of IRS-granted automatic extensions.
If you believe an extension is required for your LLC, the form you use to request it is determined by how taxes are recorded and paid on your company's profits.
LLC Tax Designations
When it comes to reporting business earnings on a federal tax return, the LLC structure is far more adaptable than other business forms. This flexibility refers to the options open to LLC members.
If you're the only LLC member, you can file as a sole proprietor or choose to treat the firm as a C corporation or an S corporation instead of a sole proprietorship.
If you have multiple LLC members, the business can be treated as a partnership or as an association to reflect the income and deductions associated with each member's share of profits.
File For Extra Time
If your LLC does not qualify for an automatic extension, you can still request one by filing Form 7004 with the IRS. You can use this form to obtain up to six months of additional time to file your expenses.
Form 7004 is used by entities taxed as corporations and those treated as partnerships. To use this form, you must also commit to paying 100 percent of your tax liability.
The IRS imposes this condition to ensure that it receives the money owed regardless of whether your business is profitable or not.
Single Member LLCs File As Individuals
If you are the only person who owns your LLC, make sure to check "Single Member LLC" when filing Form 7004. You will be required to include income earned from other sources on Schedule E of your 1040 taxes return.
Any losses claimed can offset these earnings for this year and carry over into future years.
Extensions Don't Delay Paying Tax
It's important to note that a business tax extension is not a tax payment. You will be required to make quarterly estimated taxes payments on the due dates throughout the tax period, along with your tax return.
Extensions of business taxes for LLCs are available by filing IRS Form 7004 at least 45 days before the end of the tax period. In order to get the maximum six-month extension, you must file your LLC tax return by April 15th.
Why Should You File An Extension For An LLC?
Many small business owners wait until the last minute to file their business taxes because they are unaware that an extension is available.
If you've missed the deadline and find yourself in this position, filing for an extension provides some relief.
Are LLC Tax Returns Extended?
An LLC tax return is automatically extended if the April 15th deadline has passed.
You do not need to file for an extension, but you must still provide a business tax payment of any income tax owed by this date.
Will the 2021 Tax Deadline Be Extended Again?
Unfortunately, because an LLC tax extension only gives you more time to file your LLC taxes and does not provide a grace period for payment, if you've missed the deadline and owe any taxes, there is no extra time granted for this purpose.
When Would I Need to File an Extension?
If your profits are greater than $100,000 and you don't want to risk the chance of an IRS audit, it is a good idea to file for an extension.
An LLC tax extension can be important if your business has been interrupted by family matters or other disruptions that caused you to miss the April 15th deadline.
What Happens if I Don’t File My LLC Taxes?
You may have heard horror stories about the IRS taking businesses to court for nonpayment of taxes. Because an LLC is considered a legal entity, it can be subjected to lawsuits if tax liabilities are not paid.
How Long Are LLC Tax Extensions?
An LLC tax extension is six months beyond the original filing date. By filing Form 7004, business owners who have experienced an IRS audit will receive an extension until October 15th.
What Is the Due Date for an LLC Tax Return?
An LLC tax return is due on the 15th day of the fourth month following the end of your LLC's fiscal year.
In most cases, taxes are due April 15. If you need to request an extension for an LLC tax return, Form 7004 must be filed by this date as well.
LLC Tax Extension: Conclusion
In conclusion, a tax extension is a simple way to gain more time to file business taxes. This can be done by filing Form 7004, which must be completed on or before the deadline date of April 15th.
The form asks you to estimate how much money is owed and commit to paying your business income tax as well as any interest that has accrued over the extension period.
If an estimated amount is not paid by this deadline, the IRS will continue to assess any additional tax that may be owed.
The IRS typically grants a six-month extension for filing LLC taxes and requires quarterly payment of all income earned during the period of the extension.
Business owners must make these payments on or before each due date, which is determined by the length of extension you request.
Tax extensions for certain business income tax are available for both corporations and LLCs, but no extra time is granted on payments due to the IRS.
Failure to file or pay any taxes owed will result in penalties and additional expenses that will need to be covered on top of your regular tax obligation.