Yes, the tax season is upon with the first filing date for some businesses
being March 15, 2005. If you can't imagine getting your tax returns together
by that date, you need not worry. The IRS automatically gives you an
extension if your file the appropriate form. As you might expect, there are
different forms for different businesses.
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An Important Note
It is vitally important that you understand that an extension to file
taxes is not an extension to PAY taxes. The IRS will give you a break on the
filing date, but it wants the money now! If you anticipate that you will owe
taxes, you need to send in the appropriate payment. Failure to do so could
result in interest charges when you eventually get around to filing your
returns.
Corporations
If you conduct business as a corporation with a fiscal year-end of
December 31st, you are required to file your 2004 tax returns on or before
March 15, 2005. You can get an automatic extension, however, by filing form
7004 before the March 15 deadline. Form 7004 applies both to C and S
corporations and grants you an automatic 6-month extension to September 15,
2005.
While this automatic extension applies to S corporations, you should be
aware of a quirk in the tax code. Since S corporations pass through taxes to
your personal returns, the six-month extension is really only a five-month
extension. To file your personal tax returns, you must report information
from the K-1 issued from the S corporation. Unfortunately, the IRS only
grants automatic extensions for filing personal tax returns to August 15,
2005.
Limited Liability Company
The IRS has never really figured out to how to handle limited liability
companies. It has settled on a policy of avoiding the issue and simply
treating the entity as a corporation or partnership.
Limited liability companies with more than one owner typically elect to
be treated as partnerships for tax purposes. If this describes your
situation, the LLC is required to file tax returns by April 15, 2005. You
can obtain a 3-month extension by filing form 8736. Although form 8736
contains language regarding partnerships, you will still use this form since
the IRS classifies you as a partnership for tax purposes.
If you are the sole owner of an LLC, you may be in for a surprise. The
IRS doesn t recognize LLCs owned by one person. Instead, it simply considers
you a sole proprietor and the rules for sole proprietorships apply. These
are discussed below.
Partnership
If your business is a partnership, you are required to file tax returns
by April 15, 2005. You can use form 8736 to obtain a 3-month extension.
Self-Employed/Sole-Proprietor
If you are not using a business entity, your business tax information
should be reported on your personal tax return. The due date for filing your
personal tax returns is April 15, 2005. You can obtain a four-month
extension by filing form 4868.
Summary
Regardless of how your business is organized, the IRS will automatically
grant you an extension to file your tax returns. By sending in the
appropriate form, you can avoid a mad rush that will inevitably result in
missing deductions and overpaying your taxes. Just make sure you pay any
taxes you anticipate owing by the appropriate date.
About the Author:
Richard Chapo is CEO of
http://www.businesstaxrecovery.com - Obtaining tax refunds for
small businesses by finding overlooked tax deductions and credits through a
free tax return review.
February 4, 2005
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