Do you operate a business as a partnership, a limited liability company treated as a partnership for tax purposes, or an S corporation? These business structures are commonly referred to as pass through entities.
Pass through entities generally do not pay federal income tax at the business level. Instead, taxable income, deductions, and credits pass through to the owners and are reported on the owners’ individual federal income tax returns.
Even though these entities typically do not owe federal income tax themselves, they are still required to file annual federal income tax returns. Below are several important filing rules and deadlines to be aware of.
March 16 2026 Filing Deadline for 2025 Returns
- All pass through entities must file a federal income tax return each year.
- Partnerships and limited liability companies treated as partnerships file Form 1065, the US Return of Partnership Income.
S corporations file Form 1120 S, the US Income Tax Return for an S Corporation. - If your pass through entity uses the calendar year for tax purposes, which most do, the deadline to file the 2025 federal income tax return is March 16, 2026. This is because March 15 falls on a Sunday.
Filing an Extension
The March 16 deadline may be extended by six months by filing IRS Form 7004 by March 16, 2026. An approved extension moves the filing deadline to September 15, 2026.
Keep in mind that extending the pass through entity return typically means that owners will also need to file extensions for their individual 2025 tax returns, moving their deadline to October 15, 2026.
Schedule K 1 Reporting Requirements
For each tax year, pass through entities must provide Schedule K 1 forms to their owners.
Schedule K 1 forms report each owner’s share of the entity’s income, deductions, and credits. These forms may be delivered electronically and must be included with the entity’s federal income tax return.
Because owners rely on Schedule K 1 information to prepare their individual tax returns, it is generally best to distribute these forms as early as possible. If the entity return is extended to September 15, 2026, that date also becomes the deadline for issuing Schedule K 1 forms to owners.
Three Tax Law Changes Affecting 2025 Pass Through Entity Returns
The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced several tax changes that impact 2025 pass through entity returns. Three of the most important changes are outlined below.
1. First Year Depreciation and Section 179 Expensing
The law permanently restored one hundred percent first year depreciation for eligible assets acquired and placed in service after January 19, 2025. Prior to this change, full bonus depreciation was last available for assets placed in service in 2022.
For tax years beginning in 2025, the maximum Section 179 expensing deduction increased to two point five million dollars. This deduction begins to phase out when total qualifying asset purchases exceed four million dollars.
In addition, certain nonresidential real estate classified as qualified production property, such as factory buildings, now qualifies for full first year depreciation.
2. Research and Experimental Expenditures
Businesses may immediately deduct eligible domestic research and experimental expenditures paid or incurred in tax years beginning in 2025 and later. Previously, these expenditures were required to be amortized over five years.
Eligible small businesses may elect to apply this rule retroactively to tax years beginning in 2022, 2023, or 2024. Additionally, businesses with remaining unamortized research costs from those years may elect to write off the remaining balances over one or two years beginning in 2025.
3. Business Interest Expense Deductions
For tax years beginning in 2025 and beyond, the law permanently adopted more favorable rules for determining how much business interest expense may be deducted.
While many small and midsize businesses are exempt from business interest expense limitation rules, eligibility depends on specific facts. It is important to confirm how these rules apply to your pass through entity.
Time to Start Planning with Berndt CPA
The filing deadline for most 2025 pass through entity federal income tax returns is approaching quickly.
While extensions are available, action must be taken by March 16 to file for an extension if one is needed. Early planning helps avoid penalties, delays, and last minute stress.
Contact us to get started and ensure your pass through entity filings are handled accurately and on time.
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