In the midst of the COVID-19 pandemic and subsequent financial disruptions, it’s no surprise that many corporations, partnerships, and sole proprietors chose to take advantage of the 2020 business tax filing extensions offered by the IRS last spring. After submitting the relatively simple extension request form, businesses were authorized to take an additional 6 months from the original tax due date to complete their 2020 tax paperwork.
Depending on the classification of the business, the extended due dates are coming up in September and October.
Partnerships and S corporations:
If your company is classified as a partnership or an S corporation and you requested an extension through the submission of IRS Form 7004 by March 15, you were approved to delay the filing of your 2020 federal tax return by six months, until September 15.
What to do now:
• Complete your tax return (Form 1065 for partnerships and Form 1120S for S corporations) for 2020 and submit it electronically or take it to the post office so that it is post-marked on or before September 15.
• Confirm that you don’t owe any taxes. While the extension allowed a delay of your tax filing without penalty, all tax payments were still due by the original due date. If you did not pay 2020 taxes owed by March 15, you not only owe those taxes by September 15 but also any penalties, late fees, or accrued interest.
• For late tax payments, you can be charged a monthly late filing fee of 5% of the outstanding tax. The maximum late filing fee is 25%.
C corporations:
If your company is classified as a C corporation and you requested an extension through the submission of IRS Form 7004 by April 15 (for corporations that operate on a calendar year), you were approved to delay the filing of your 2020 federal tax return by six months, until October 15.
What to do now:
• Complete your tax return (Form 1120) for 2020 and submit it electronically or take it to the post office so that it is post-marked on or before October 15.
• Confirm that you don’t owe any taxes. While the extension allowed a delay of your tax filing without penalty, all tax payments were still due by the original due date. If you did not pay 2020 taxes owed by April 15, you not only owe those taxes by October 15 but also any penalties, late fees, or accrued interest.
• For late tax payments, you can be charged a monthly late filing fee of 5% of the outstanding tax. The maximum late filing fee is 25%.
Single owner limited liability companies and sole proprietorships:
If your business is a single owner LLC or a sole proprietorship and you requested an extension through the submission of IRS Form 4868 by May 17, 2021, you were automatically approved to delay the filing of your 2020 federal tax return until October 15, 2021, six months after your original due date of April 15.
What to do now:
• Complete your 2020 tax return and submit it electronically or through the mail, making sure it’s postmarked by October 15.
• Confirm that you’ve already paid any taxes owed for 2020. While the extension allowed a delay of your tax filing without penalty, tax bills were still due on time. If you did not pay taxes owed by May 17, you will not only owe those taxes by October 15 but also a late fee and accrued interest.
• For late tax payments, you can be charged a monthly late filing fee of 5% of the outstanding tax. The maximum late filing fee is 25%.
Strobl Sharp is a team of experienced and trusted lawyers that specialize in taxation to minimize the impact of federal, state, and local taxes on business and individual clients. For more information, visit Strobl Sharp online at StroblLaw.com or on LinkedIn.