There are times when a partnership, corporation, or S corporation may dissolve or cease business operations during a tax year. When this happens, the entity should file a final tax return based on date of dissolution.
When is the return due?
- Corporation - A corporation that has dissolved must file its final return by the 15th day of the fourth month after the date it dissolved.
- S corporation dissolved - An S corporation that has dissolved must file its final tax return by the 15th day of the third month after the date it dissolved.
- S corporation election terminated - If the S corporation election was terminated during the tax year and the corporation reverts to a C corporation, Form 1120-S for the S corporation's short year should be filed by the due date (including extensions) of the C corporation's short year return.
- Partnership - The partnership’s tax year ends on its date of termination, and it must file its final tax return by the 15th day of third month after that date.
What if the forms for the tax year aren't yet available?
An entity that has dissolved may not be able to file using the official form since at the time the dissolution the current year's forms aren't available. However, this does not absolve the entity from complying with the filing instructions. An entity may wish to file an extension request upon dissolution, taking into account the final return's due date and when the current tax year's forms will be available.
What if the return isn't timely filed?
The entity may be assessed a penalty for failing to timely file. If it is not practical to file the return within the required time period using the correct official forms, filing an extension will ensure no additional expense or penalties to the dissolved entity.
How is the partner or shareholder affected?
The partner and S corp shareholder will include the final Schedule K-1 in their year-end tax return as normal.
Note: This article provides general information regarding IRS guidelines for filing final returns for dissolved entities. It is not intended as tax advice.
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