September 15* is the extended due date for partnership and S-corporation tax returns.
October 2* is the extended due date for trust tax returns.
Late-filing penalty for partnerships and S-corporations
Late-filing penalty for trust returns
If you have a calendar year 2022 partnership, S-corporation, or trust return on extension, don’t forget the extension for filing those returns ends on September 15, 2023* (October 2, 2023* for trust returns).
Pass-through entities such as partnerships, S-corporations, and fiduciaries (trusts, estates) pass their income, deductions, credits, etc., through to their investors, partners, or beneficiaries, who in turn report the various items on their individual tax returns. Partnerships file Form 1065, S-corps file Form 1120-S, and fiduciaries file Form 1041, with each partner, shareholder, or beneficiary receiving a Schedule K-1 from the entity that shows their share of the reportable items.
If all of the aforementioned entities could obtain an automatic extension to file their returns on the same extended date as allowed to individuals, it would be difficult for individuals to meet the filing deadline without estimating the pass-through information and then later filing an amended return when the actual data was received.
To overcome this problem, the automatic extension period for partnerships and S-corporations is set at 6 months, while the extension period for trust and estate income tax returns is 5½ months. Thus, for calendar year partnerships and S-corps that had an original due date of March 15, 2023, and requested an extension of time, the extended due date is September 15*. This gives individual taxpayers who are partners in a partnership or shareholders in an S-corp about a month in which to complete their individual 1040 returns that have an extended due date of October 16.
The original due date for calendar year 2022 trust returns was April 18, 2023, and with a 5½-month extension period, the due date for these returns would normally be September 30, but because September 30 is a Saturday in 2023, the returns are due the next business day, October 2*. Thus, individual beneficiaries will have only about 2 weeks to finish up their individual returns.
An S-corporation or partnership which fails to file their 2022 return on time is liable for a monthly penalty equal to $220 times the number of persons who were partners, or shareholders for S corps, during any part of the taxable year, for each month or fraction of a month for which the failure continues. In addition, a $310 penalty may be imposed on the partnership or S-corporation for each Schedule K-1 that it fails to timely provide to its partners or shareholders (maximum penalty per year could be as much as $3.8 million, depending on the entity’s gross receipts). These penalties can be substantial!
Trusts are subject to a penalty of 5% of the tax due for each month, or part of a month, for which a return is not filed up to a maximum of 25% of the tax due. A $310 per beneficiary penalty may also apply for failure to timely provide a Schedule K-1. Each beneficiary, who receives a distribution of property or an allocation of an item of the estate, is required to be provided a Schedule K-1.
*The September 15, 2023 and October 2, 2023 extended due dates may be further extended for businesses, including S-corporations, partnerships and trusts, whose principal place of business is located in an area declared a disaster area by the Federal Emergency Management Agency (FEMA). The return must be filed by the later of the normal extended due date (if the entity had requested an extension) or the end of the postponement period that is specified by the IRS when the disaster relief is announced. Check this website for disaster related filing and paying postponements.
If this office is waiting for some missing information to complete your pass-through return, we will need that information at least a week before the September 15 or October 2 due dates (or the disaster extension due date if later). The late-filing penalties are substantial, so please call this office immediately if there are anticipated complications related to providing the needed information so a course of action can be determined to avoid the potential penalties.
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