March Madness is in the air and basketball isn’t the only thing on the minds of business owners throughout the country. If you operate your business in the form of a corporation, you probably already know that your calendar year-end corporation has to file its income tax return by March 15, but did you know March 15 could be important for you in other ways? What about April 17 and, of course, the extensions that many of us seem to always need to file our returns? Let’s take a look at a few of the deadlines many Americans will be facing in the next two months.
As was just mentioned, the first deadline for a corporation to keep in mind is the filing deadline for income taxes. The actual due date for a corporate return is the fifteenth day of the third month after the close of the corporation’s fiscal year. For companies with a December 31 year-end, that means March 15. So what happens if you can’t meet that deadline? You extend, but remember the government has a payroll to meet too, so extending the time to file your return does not mean you have extra time to pay what you think you owe in tax. You must send what you think the company will owe along with your request for extension. The extension will allow you to file your tax return no later than September 15.
Did you know that certain payables at year-end also must be paid within two and one-half months of the end of your fiscal year? If not, don’t worry because many people are in that boat. If you accrue vacation or sick time, the only deduction you get is what is paid within the first two and one-half months after your year-end. Did you tell your employees they would get a bonus this year? Well, if you want to deduct it, make sure you pay it by March 15, and before you file your return. There are similar rules for other expenses, so don’t take for granted that if you booked it, you can deduct it.
Are you about ready to attack the double taxation monster and convert your C Corporation into an S Corporation? If you are not familiar with these types of corporations, the bottom line is that a C Corporations pays its own income tax while the S Corporation income is taxed once at the shareholder level. In the case of the C Corporation, it must then pay dividends to get money out to its shareholders and those dividends are taxable. If you are planning on converting to an S Corporation for 2006, file the election by March 15.
Does your company have a profit-sharing or other retirement plan? Don’t forget to make any accrued contribution to the plan prior to filing your return. If you can’t make the contribution by March 15, extend to September 15 to give yourself time to obtain the funds needed to make the contribution.
Other Businesses and Individuals
If you operate your business as a partnership or as a sole proprietorship, the deadline for filing your return is April 17 this year. If you are the trustee of a trust filing Form 1041, your deadline is also April 17.
Much of what is applicable to the corporate world is also applicable to the partnership world. For example, if your partnership has a retirement plan of some sort, the deadline for making any accrued contribution is the moment prior to filing your partnership’s return of income. You do get to wait until the extension dates to make the contribution, so if you extend only once, you have until July 17 to pay your contribution and file your return. If you extend the second time, you have until October 16. Extensions of time for trust returns and returns of estates follow the same rules as partnerships.
This year, the Internal Revenue Service has finally recognized that those of us who extend our personal returns through August 15 are likely to extend a second time until October 16. To save us the time and hassle of filing two extensions and them the expense of processing the extensions, individuals now file one extension request that is good through October 16.
If you operate your business as a sole proprietorship, that means you report income and expense on Schedule C. Again, any retirement plan contributions must be made prior to filing your return, so take into account your need for any funds to make your plan contributions when filing your return.
Also, if you have been funding an IRA, make sure you deposit your contribution for 2005 on or prior to April 17. Unlike other retirement arrangements, the extension of the tax return does not extend the time to make your IRA contributions.
In addition to the requirements to file your tax returns, quarterly estimate payments and payroll tax returns are always a concern to those who must file them. Does all of this have you confused? Don’t let it get you down. With this firm’s experience, you have a friend to turn to for help with filing the appropriate returns. Give us a call today if you are staring at looming deadlines and don’t quite know how you will meet them.
Have a terrific March.