How to File A Tax Extension for a Partnership?
While it may feel like you just completed your year-end tax filing, there is another crucial IRS deadline right around the corner. This is the business income tax return deadline. Many types of businesses must complete and file their returns with the IRS by a deadline determined by their tax year and how the business is classified by the IRS. In this article, we are going to address partnerships, in particular, from the deadline to file from the form required by the IRS.
We’re covering all of the helpful information that partnerships need to know.
What is a Partnership?
A partnership consists of at least two business partners who share the responsibility, gains, and losses of the business they share. Partnerships can be classified as a general partnership, a limited partnership, or a limited liability partnership.
A limited liability partnership is one in which the partnership was formed under limited liability law. In this type of partnership, neither partner is personally liable for the debts of the business. This is often the business structure chosen by professionals like lawyers or doctors.
The limited partnership is essentially a cross between a general partnership and a limited liability partnership. In this type of partnership, In this business structure, there is one general partner and one or more silent partners. The general partner is liable for business debts, and the silent partner(s) are liable for their investment in the business.
What business income tax return should a partnership file?
Partners should file Form 1065, U.S. Return of Partnership Income, for their business each year. This form was created by the IRS to report the gains, losses, credits, deductions, and other important information related to the operation of the partnership.
In addition to Form 1065, partnerships must attach a Schedule K-1 for each partner. Schedule K-1 provides a summary of each partner’s shares within the partnership, as they must share this information on their personal income taxes.
When is the deadline to file Form 1065?
This form must be completed and filed with the IRS no later than the 15th day of the third month following the end of the organization’s tax year. For partnerships that operate on a calendar year, this deadline is quickly approaching on March 15, 2023.
Can a partnership apply for a deadline extension?
Yes, business partners can file an application to extend their IRS deadline. To do this, they should file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.
Partnerships can easily file this automatic extension to the IRS for up to an additional 6 months of time to complete their business income tax return. This will push their March 15, 2023 deadline out to September 15, 2023. Since this is an automatic extension, there is no explanation or reason for filing required by the IRS. The IRS has no problem with businesses filing a Form 7004 extension as long as the form is completed with accurate information that matches the IRS records and before the deadline of your original form.
To file your Form 7004 quickly and accurately, check out ExpressExtension.
Filing Form 1065
Form 1065 is a lengthy IRS tax form that covers a multitude of financial information related to the partnership. In total, it is 5 pages and is best completed with the assistance of a tax professional. Some of the information required on Form 1065:
- Basic business information, including name, address, principal business activity, business code number, EIN, the date the business was started, etc.
- Total assets and liabilities
- Total deductions (employees’ wages and salaries, rents, bad debts, etc.)
- Total credits
- The accounting method used by your business.
- Tax payments due to the IRS.
- A summary of how the business is divided between the partners.
- A balance sheet reflecting your business operations.
Mailing your Form 1065 to the IRS
What are the penalties associated with Form 1065?
Partners who fail to complete and submit their Form 1065 on time or who fail to furnish information on time can fall subject to penalties.
For late filing, the penalty is up to $205 for each member of the partnership for each month or partial month that the return is late for up to 12 months.
Form 1065 must be filed with Schedule K-1 attached for each partner and furnished to them. It is important that Schedule K-1 is filed on time with the IRS and furnished to the partners as well.
Failure to furnish Schedule K-1 late or with incorrect information can result in a penalty of $270 for each Schedule K-1. The maximum penalty for this offense in a calendar year is $3,339,000.
If filers intentionally disregard their responsibility to furnish and file accurate information, the penalty rate is raised to $550 or 10% of the total amount of items that should have been reported, whichever is greater.
Extend your 1065 deadline by filing Form 7004
Many partnerships may need to delay their filing deadline in order to gather the needed information for filing Form 1065. Luckily, partnerships can complete Form 7004.
As long as you file Form 7004 with accurate information before your original filing deadline, the process will be simple and straightforward. The IRS doesn’t require you to provide any official reason for filing your partnership tax extension and when filing electronically, you can receive instant IRS updates. This is great, considering that the IRS is still facing a backlog of paper-filed forms.
E-filing Extension Form 7004
With ExpressExtension, your e-filing process will be both easy and accurate. Not only does our application make it possible for you to e-file 7004 in minutes, but if your form is rejected by the IRS, you are able to correct and retransmit it at no additional cost! Watch the video below to learn more.
Do you owe a tax payment to the IRS? You can easily set up your payment while transmitting your extension form. We support both Electronic Funds Withdrawal (EFW) and the Electronic Federal Tax Payment System (EFTPS).
To get started, create an account with ExpressExtension today!
