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Filing as a Partnership or S Corp? Read this before March 16

If you operate your business as a partnership, an LLC taxed as a partnership, or an S corporation, your business is considered a “pass-through” entity for federal tax purposes.

In simple terms, that means:

• The business itself generally does not pay federal income tax.

• Instead, profits, losses, deductions, and credits pass through to the owners.

• Each owner reports their share on their personal federal income tax return.

Even though the entity typically doesn’t pay federal income tax directly, it still must file an annual return. Here’s what you need to know for the 2025 tax year.

March 16, 2026 filing deadline

Most pass-through entities use the calendar year. For the 2025 tax year, the federal filing deadline is March 16, 2026 (because March 15 falls on a Sunday).

Required forms:

• Partnerships and LLCs taxed as partnerships file Form 1065, U.S. Return of Partnership Income.

• S corporations file Form 1120-S, U.S. Income Tax Return for an S Corporation.

If you need more time, you can request a six-month extension to September 15, 2026 by filing Form 7004 by March 16.

Keep in mind: If the business files an extension, owners will generally also need to extend their individual 2025 tax returns to October 15, 2026.

Schedule K-1: What owners receive

Each year, pass-through entities must provide every owner with a Schedule K-1. This form reports the owner’s share of:

• Business income

• Deductions

• Credits

• Other tax items

Owners use the information on Schedule K-1 to prepare their personal tax returns.

If the business extends its filing deadline to September 15, 2026, that is also the deadline for issuing K-1s. Because owners depend on these forms, it’s usually beneficial to complete the business return as early as possible.

Three tax law changes that affect 2025 returns

The One Big Beautiful Bill Act, signed into law on July 4, 2025, includes several provisions that impact 2025 returns for pass-through entities. Here are three key changes to be aware of.

1. First-year depreciation

The law permanently restored 100% first-year (bonus) depreciation for eligible assets acquired and placed in service after January 19, 2025.

In addition:

• The maximum Section 179 deduction increased to $2.5 million.

• The phaseout now begins when total qualifying asset purchases exceed $4 million.

• Certain nonresidential real estate classified as qualified production property (generally factory buildings) may also qualify for 100% first-year depreciation.

If your business plans to purchase equipment or invest in facilities, these rules may allow you to deduct more of the cost upfront.

2. Research and experimental (R&E) expenditures

For tax years beginning in 2025 and beyond, eligible domestic research and experimental expenditures can be deducted immediately.

Previously, these costs had to be amortized over five years.

There are also special transition rules:

• Eligible small businesses may elect to apply the immediate deduction rule retroactively to tax years beginning in 2022, 2023, or 2024.

• Taxpayers with unamortized R&E costs from 2022 through 2024 may elect to deduct the remaining amount over a one- or two-year period starting in 2025.

If your business develops products, software, or processes, these changes could significantly affect your tax position.

3. Business interest expense deductions

For tax years beginning in 2025 and beyond, the law permanently adopts more favorable rules for calculating how much business interest expense can be deducted.

Many small and midsize businesses are exempt from the business interest limitation rules. However, it’s important to confirm whether your pass-through entity qualifies.

If your business has loans for equipment, real estate, or operations, this is an area worth reviewing.

Start planning now

Although pass-through entities generally don’t pay federal income tax at the entity level, filing is still required. The deadline for most calendar-year entities is March 16, 2026, and extensions must be filed by that date if needed.

Owners also rely on timely Schedule K-1s to complete their individual returns. If you haven’t started preparing your 2025 return, now is the time to begin.

Looking for guidance and support? Your local Padgett office is ready to help!

The post Filing as a Partnership or S Corp? Read this before March 16 appeared first on Padgett.