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2023 Pass-through Entity Tax Deadline Approaching

February 13, 2023

Pass-through entities…your 2022 tax returns are due March 15th! Need more time to file? You may be eligible for an extension.

Attention Pass-through entities…are you prepared for the impending March 15th tax deadline? Here’s what you need to know.

Who does the deadline apply to?

The March 15th federal deadline applies to all pass-through entities, which include calendar year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships for tax purposes. These entities generally file returns on Form 1065 or Form 1120S.

Rhode Island state tax returns for Single member LLCs (SMLLC) which are owned by an entity with a March 15 deadline are also due March 15. If a SMLLC is owned by an individual its Rhode Island tax return is due April 18th.

What about Massachusetts? MA does not have a return, but it does have an annual report for SMLLCs which needs to be filed with the Secretary of the Commonwealth. The Massachusetts Annual Report is due every year before your LLC’s anniversary date.

What is a pass-through entity?

A pass-through entity is a business structure that reduces the effects of double taxation, (which occurs when income tax is levied once on corporate income, then again when profits are distributed as dividends to shareholders). Income or loss from a pass-through entity flows through to the individual owners and is taxed only once on the owners’ individual tax returns. Therefore, these types of entities are not subject to income tax at the entity level.

Note - see our blogs on MA and RI Pass-through entity level taxes to see a benefit to electing to pay the state taxes at the entity level.

All S corps, partnerships and LLCs treated as partnerships must file their 2022 calendar year income tax return (Form 1120S or Form 1065) by March 15, 2023 and pay any taxes due if applicable. You must provide each shareholder or partner with a copy of Schedule K-1, which reports their allocated share of the pass-through entity’s income or loss. For an automatic six-month extension, you must file Form 7004.

Interested in being treated as an S corp beginning with calendar year 2023?

File Form 2553, Election by a Small Business Corporation by March 15th to be treated as an S corp if you are an existing LLC or C corporation. If you are a newly formed LLC or C corporation, you have 2 months and 15 days from formation or incorporation to make the election. If you miss this deadline, the switch to S corp status will not take effect until calendar year 2024. There are situations with reasonable cause where a late election can be filed.

What if the entity isn’t on a calendar year basis?

In this case, the return is due the 15th day of the third month following the end of the tax year, however, there may be an additional tax form needed to calculate a deposit to pay to the IRS for the deferral of income.

Need more time to file?

Avoid penalties related to a late return by filing for an extension by March 15th. This gives you until September 15, 2023, to get your 2022 returns in.

Questions on the deadline? Having trouble with your filings? Contact a member of our Tax Services Team.

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