Be aware of March 15th! If you have historically struggled to remember the due date of your tax return, this year will be no different. The new due date for calendar year pass-through entities (partnerships and S Corporations) is March 15th.
When did this change happen?
Until the 2016 tax year, partnerships shared the April 15th deadline with individual taxpayers. One of the primary reasons for moving up the partnership filing deadline was to make it easier for owners to file their personal returns by the April filing deadline. After all, partnership and S corporation income passes through to the owners. This income is passed to the owners on a form K-1.
For partnerships with fiscal year ends, tax returns are now due the 15th day of the third month after the close of the tax year. The same deadline applies to fiscal-year S corporations. Under prior law, returns for fiscal-year partnerships were due the 15th day of the fourth month after the close of the fiscal tax year.
Avoiding a tragedy
If you haven’t filed your calendar-year partnership or S corporation return yet and you need more time, don’t worry. Filing an extension is still an option to give you more time to complete your returns. Under the current law, the maximum extension for calendar-year partnerships is six months (until September 16, 2019, for 2018 returns). This is one month longer than the previous five month extension allowed under the old law. So the extension deadline did not change — only the length of the extension has changed. Similarly, the extension deadline for 2018 calendar-year S corporations is September 16, 2019, too.
Whether you’ll be filing a partnership or an S corporation return, you must file for the extension by March 15 if it’s a calendar-year entity. No reason needs to be provided, but the extension form has to be submitted (either electronically or mailed). Interestingly, the extension form does not require a signature.
Extending the drama
Filing for an extension is not the end of the world. It can come in quite handy if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your business tax return right now. It can also be a tax-smart idea to give yourself more time to make important decisions especially since we have had major tax law changes that affect the 2018 filings. It also provides an extension of time to fund certain retirement and profit sharing contributions.
However, keep in mind an extension is only an extension of time to file. It is not an extension of time to pay. If you owe tax you still must pay any tax due by the original deadline before extensions. Generally, there isn’t a tax liability at the partnership or S corporation level.
Generally, filing for an extension for the entity’s tax return could also cause you to file an extension for your individual tax return. If a tax liability exists on your personal return, you may be assessed penalties PLUS interest if not fully paid by the April 15th deadline.