Filing 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.' This is something that is important to understand when running an LLC.
From my years of business expertise, I have noticed that filing an LLC tax extension can stress even experienced business owners.
To avoid tax-related issues, my team of legal experts and I have created this guide to help you handle LLC tax extensions and prepare for what lies ahead.
Quick Summary
- Filing an LLC tax extension is a mandatory step when you need more time to complete your tax return
- The LLC tax extension should provide you with an extra six months, as long as you submit the form within the advised period
- To avoid future complications, bear in mind that the extension is not for paying taxes owed but only for filing
How To File an Extension for LLC?
To file an extension for your LLC determine the appropriate form for your tax recording and payment method.
Request an extension to avoid penalties if you need more time to complete accurate returns.
Here are some factors you should consider when filing an extension for an LLC:
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 [1].
Any losses claimed can offset these earnings for this year and carry over into future years.
Extensions Cannot Delay Paying Tax
Filing an extension does not delay paying taxes. Know that an extension can only extend the deadline for filing the tax return, but not the deadline for paying any taxes owed.
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 [2].
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 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.
C-Corporation
If the MultiMember LLC is a corporation, it must file Form 1120, U.S. Corporation Income Tax Return, the C corporation income tax return [3].
S-Corporation
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 [4].
LLC Classifications
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 [5].
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)
An Overview of the LLC Structure
An LLC is a type of business ownership structure. There are many LLCs in use throughout the United States, with each state having its own specific guidelines for starting an LLC.
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.
FAQs
Why Should You File An Extension For An LLC?
You should file an extension for an LLC as a relief if you missed the tax deadline. Many small business owners are unaware of this option, leading them to wait until the last minute to file their business taxes.
Are LLC Tax Returns Extended?
An LLC tax return is automatically extended after the April 15th deadline. No separate extension filing is required, but you must make a business tax payment for any income tax owed by that date.
Will the 2023 Tax Deadline Be Extended Again?
The 2023 tax deadline for LLCs will not be extended again.
While an extension allows more time for filing, it does not grant a grace period for tax payment. If taxes are owed and the deadline is missed, no additional time is given.
When Would I Need to File an Extension?
File an LLC tax extension if your profits exceed $100,000 and you seek to reduce the risk of an IRS audit. Extensions are valuable if family matters or disruptions caused you to miss the April 15th deadline.
What Happens if I Don’t File My LLC Taxes?
If you don't file your LLC taxed it may lead to legal consequences, including potential lawsuits, as the LLC is a distinct legal entity responsible for its tax liabilities.
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, file Form 7004 by this date as well.
LLC Tax Extension
Filing Form 7004 by April 15th grants a tax extension, providing extra time to estimate and pay owed business income tax along with accrued interest to avoid IRS penalties.
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 timely tax payments based on the extension length requested.
While extensions are available for corporations and LLCs, they don't provide extra time for IRS payments. Failure to file or pay taxes on time leads to penalties and additional expenses.
References:
- https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
- https://www.irs.gov/forms-pubs/about-form-7004
- https://www.investopedia.com/terms/c/c-corporation.asp
- https://www.investopedia.com/terms/s/subchapters.asp
- https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
