March 15, 2018, is the deadline for filing 2017 S-Corp and partnership tax returns, or extensions, 2018 S-Corp elections, and 2018 Section 475 elections. Don’t miss any of these tax filings or elections; it could cost you.
2017 S-Corp and partnership tax extensions
Extensions are easy to prepare and e-file for S-Corps and partnerships since they pass through income and loss to the owner, usually an individual. Pass-through entities are tax-filers, but not taxpayers. 2017 individual and calendar-year C-Corp tax returns or extensions with taxes owed are due April 17, 2018.
Some states have S-Corp franchise taxes, excise taxes, or minimum taxes, and payments are usually due with the extensions by March 15. LLCs filing as a partnership may have minimum taxes or annual reports due with the extension by March 15.
2017 S-Corp and partnership extensions give six additional months to file a tax return, by Sep. 17, 2018.
The IRS late filing penalty regime for S-Corps and partnerships is similar. The IRS assesses $200 per owner, per month, for a maximum of 12 months. Taxpayers may request penalty abatement based on reasonable cause. Ignoring the extension deadline is not reasonable cause. There is also a $260 penalty for failure to furnish a Schedule K-1 to an owner on time, and the penalty is higher if intentionally disregarded. States assess penalties and interest, often based on payments due.
2018 S-Corp elections
Traders qualifying for trader tax status and interested in employee benefit plan deductions, including health insurance and retirement plan deductions, probably need an S-Corp. They should consider a 2018 S-Corp election for an existing trading entity, due by March 15, 2018, or form a new entity and file an S-Corp election within 75 days of inception. Most states accept the federal S-Corp election, but a few states do not; they require a separate S-Corp election filing by March 15. If you overlooked filing a 2017 S-Corp election by March 15, 2017 and intended to elect S-Corp tax treatment as of that date, you may qualify for IRS relief. (See Late Election Relief.)
2018 Section 475 MTM elections for S-Corps and partnerships
Traders, eligible for trader tax status, should consider attaching a 2018 Section 475 election statement to their 2017 tax return or extension due by March 15, 2018, for partnerships and S-Corps, or by April 17, for individuals and corporations. Section 475 turns capital gains and losses into ordinary gains and losses thereby avoiding the capital loss limitation and wash sale loss adjustments (tax loss insurance). There are also benefits to 475 income: The 20% pass-through deduction on qualified business income subject to taxable income limitations. (Read Consider 475 Election By Tax Deadline To Save Thousands.)
If a trader wants to revoke a prior year Section 475 election, a revocation election statement is due by March 15, 2018. (See New IRS Rules Allow Free And Easy Section 475 Revocation.)
Tax compliance services
Green, Neuschwander & Manning LLC offers tax compliance services to traders, which include tax preparation and tax planning. If you haven’t signed up yet for our entity and individual service, do so immediately, so we can prepare your extensions and consider the above elections on time. Alternatively, discuss the above matters with Robert A. Green, CPA in a consultation.