If you’ve recently formed your small business as an LLC with an S Corporation, congrats! You can now enjoy the tax benefits that come with having a pass-through business entity, along with the legal protection of your personal assets.
For those with an S Corporation, it’s important to note this year’s new filing deadline for your tax returns. Your taxes for 2019 are going to be slightly different from previous years due to what is going on in the United States with the coronavirus pandemic. The IRS has extended the deadline.
Here are some of the most recent changes that have taken place — review carefully to ensure you file your taxes by the new deadline to reduce the risk of incurring penalties. And as always, you should keep in contact with your CPA or accountant during this time as some of the changes may or may not pertain to your specific circumstance.
S Corporation Tax Filing Deadline
S Corps need to file a tax return and pay any taxes owed for 2019 by July 15, 2020, (four months later than the normal March 16 deadline due to the coronavirus pandemic).
Each individual shareholder will need to file a Form 1120-S, which is an S Corp’s annual business return. The 1120-S is part of the Schedule K-1 document. This tax return is how each shareholder of an S Corporation reports income, losses and dividends. You’ll be responsible for paying any taxes, interest and penalties due.
An S Corporation must also file a Schedule K-1 for each of its shareholders by July 15, and is responsible for payroll taxes with Form 940 every quarter. Shareholders of S Corps must have these payroll filings plus their K-1 to file their own personal income tax return by the deadline.
S Corp Extension
If you need more time to file your tax returns for your S Corporation, you can request a six-month extension by filing Form 7004. Once you receive an extension, you’ll have until September 15, 2020, to file your tax return. While you can receive more time to file your returns, you’ll still need to pay for any taxes due. Otherwise, expect to pay penalties (which we’ll discuss below).
While you can get an extension for Form 1120-S, it’s easier on everyone to file on time. Filing on time will help prevent you from paying interest, failure-to-pay fees and failure-to-file fees for any tax forms that aren’t filed on time.
Penalties for Filing Late
If you aren’t able to meet the July 15 filing deadline — or your return doesn’t include all the required info — expect to incur penalties. Again, be aware that due to the coronavirus pandemic where businesses across the nation have been shut down, the date to file has been pushed back.
If no tax is due, each shareholder will be charged a late-filing penalty of $200 for each month you’re late (up to 12 months). So, if there are two shareholders in your S Corporation and you’re two months late filing your tax returns, expect to pay $800 in penalties.
If you do owe taxes, you’ll need to pay 5 percent of the unpaid taxes for each month you’re late in filing your return. That’s on top of the aforementioned late-filing penalty — so it’s in your best interest to file in the timeliest manner.
Other Late Penalties
If you’re late in paying your taxes, you might need to pay half a percent of unpaid taxes each month (up to 25 percent of the unpaid amount). And if you don’t provide all the required information on your Schedule K-1, you might need to pony up $270 for each incomplete Schedule K-1 submitted.
If you have questions on filing your tax returns for your S Corporation, reach out to a tax professional for guidance. And remember that Incfile is here to help. Our tax specialists can answer your questions, and you can also work with one of our tax professionals to file your business taxes with ease and confidence.