Before we get started there are a few important definitions we need to have straight on this topic. The tax deadline is not the same as the extended tax deadline and a tax return is not the same as a tax refund.
The tax deadline is the date the respective tax return is due to the IRS…aka when your taxes are due.
The extended tax deadline is the date the IRS grants you to file your return at a later date than the tax deadline if you successfully file for an automatic extension properly.
The term tax return refers to the forms you file that calculate your taxes.
The term tax refund refers to money you get back from the IRS.
The last two points don’t have anything to do with filing taxes or paying taxes, they are just pet peeves of mine.
Q: If I file an extension, can I pay my taxes when I file?
A: No, filing an extension does NOT give you more time to pay your taxes. If you wait,
you will have to pay penalties and interest.
Q: If I don’t have my accounting finished for last year how can I pay my taxes by the tax deadline?
A: The IRS doesn’t care. There are safe harbor payment options for the amount of your
payment that I’ll discuss in my next blog, but if this is your situation it’s time for another
accountant that keeps your books current so you can estimate your payment and get it
done.
How our tax system is supposed to work
The IRS considers its tax system a pay-as-you-earn system. People that receive a paycheck have federal withholding taken out of their checks and given to the IRS to be applied toward their federal taxes. Business owners are expected to make estimated tax payments 4 times a year based on their projected profit. This is what I mean by pay-as-you-earn…as you earn you pay.
When you don’t follow the IRS guidelines for these payments they like to impose penalties:
Failure to Pay Tax Penalty – The IRS will impose this penalty when you don’t pay the tax you owe by the due date…not the extended date.
Underpayment of Estimated Tax – To add insult to injury, when you don’t pay by the due date of the estimated tax accurately or on time.
More information about IRS penalties can be found here: https://www.irs.gov/payments/penalties
Filing deadlines for businesses
The four most common entity structures for law firms are below. Let’s talk about how the entity structure determines your tax deadline and when your taxes payments are due.
LLC taxed as a sole proprietor (if this is you, we need to talk!)
LLC taxed as a Partnership (with more than two members)
LLC taxed as an S Corporation
S Corporation
LLC Taxed as Sole Proprietor
If this is your structure, more than likely this needs some quick attention as I am not fond of this setup! The tax deadline to file is April 15th. If that day falls on a holiday or a weekend, the deadline is moved to the next business day.
You can file an Application for an Automatic Extension of Time to File for your personal return. Complete the IRS Form 4686, found here, and mail it Certified Return Receipt, like you do everything to the IRS, with a postmark on or before April 15th. If filed properly The IRS will grant you an additional 6 months to file your tax return so October 15th will be your extended tax deadline. This will allow you to extend the tax filing deadline by an additional 6 months to file your tax return. It does not extend the deadline to pay your tax! Your tax payment is due by April 15th.
LLC Taxed as a Partnership and as an S Corporation
If you are taxed as a Partnership or an S Corporation your tax deadline to file is March 15th. If that day falls on a holiday or a weekend, the deadline is moved to the next business day.
You can file an Application for an Automatic Extension of Time to File for your Partnership or S Corporation return by March 15th. Complete IRS Form 7004, found here, and mail it Certified Return Receipt, as always, with a postmark on or before March 15th. It has to be filed correctly and on time. If filed properly, the IRS will grant you an additional 6 months to file, so September 15th will be your extended tax deadline. It does not extend the deadline to pay your tax!
Since Partnership and S Corporation flow their income through to the owners/members/shareholders on a K-1, the tax will be paid on the personal return, which is due on April 15th. Your tax payment is due by April 15th. Even if you are granted an extension of time to file your personal return, you will need to make your payment by April 15th to avoid the IRS penalty notices in the mail.
BONUS: Corporations
If you are taxed as a Corporation your tax deadline to file is March 15th. If that day falls on a holiday or a weekend, the deadline is moved to the next business day.
You can file an Application for an Automatic Extension of Time to File for your Partnership or S Corporation return by March 15th. Complete IRS Form 7004, found here, and mail it Certified Return Receipt, as always, with a postmark on or before March 15th. It has to be filed correctly and on time. If filed properly, the IRS will grant you an additional 5 months to file, so September 15th will be your extended tax deadline. It does not extend the deadline to pay your tax! Pay your taxes by March 15th to avoid the IRS penalty notices in the mail.
RECAP: When is the deadline to pay your taxes?
LLC taxed as a Sole Proprietor – April 15
LLC taxed as a Partnership – April 15
LLC taxed as an S Corporation – April 15
Corporation – March 15