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LLC 1065 Filer Vs 1120 Filer: A Detailed Guide

LLC 1065 Filer Vs 1120 Filer: A Detailed Guide
Ines Zemelman, EA
19 September 2022

Running a business and selecting an LLC opens up a lot of options for you. You have to decide whether you need to be an LLC 1065 filer vs 1120 filer. Before making any decision assess your tax situation. 

In this article, you are going to find out what is an LLC 1065 and 1120 filer and which return to file if you opt to be 1065 vs 1120 filer. 

What Is An LLC 1065 Filer?

LLC 1065 filers are those businesses that run as partnerships. They file Form 1065, US return of partnership income. An LLC is a limited liability company and its owners have a choice in how their LLCs are classified for tax purposes. A domestic LLC that has two members is by default classified as a partnership for federal income tax purposes. 

Who Files It?

According to the IRS instruction for Form 1065, in addition to the domestic partnership, the following entities are required to file Form 1065: 

  • LLC classified as a partnership has to file form 1065 online even if there are over 100 members. However, if the members find it too difficult to file this form online they can request a hardship waiver using tax Form 8944.
  • A religious organization exempt from income tax under section 501(d) must file form 1065 to report its taxable income. 
  • A partnership that wants to be certified as a qualified opportunity fund must file form 1065 along with tax Form 8996

When To File It?

The due date for filing Form 1065 for a domestic partnership is by the 15th day of the 3rd month after its tax year has ended. For the calendar year, the due date is March 15. 

What Is 1120 Filer? 

The business incorporated in the US has to file Form 1120 to compute its tax liability. They report their gains, losses, and deductions. The IRS issued comprehensive instructions for Form 1120

Who Files It? 

All domestic corporations must file the corporation income tax return. The following entities are required to file 1120. 

When To File It?

Usually, you will file your corporation tax return by the 15th of April after the end of its tax year.

Suppose you have incorporated a new corporation in August 2021 and the tax year ends in December 2021 you will file a short-period return i.e. from August 2021 to December 2021 by 15th April.

If you choose to end your fiscal tax year on let’s say June 30 you must file by the 15th of September which is the 3rd month after the end of your fiscal tax year. The same rule applies to corporations having short-tax years. 

What happens when you have to dissolve your company as many did during the pandemic? Imagine your company dissolved in mid of the year, July 2021 to be exact. In this case, you will file your final return on 15th November 2021 which is the 4th month after the date it dissolved. 

1065 Filer Vs 1120 Filer — Which Return To File?

How your business is classified will determine whether you need to be a 1065 filer vs 1120 filer. LLC has to file Form 8832 to elect how they want to be treated for tax purposes. Small businesses can instead file Form 2553 as per the IRS instructions if they qualify to elect. 

A lot of factors need to be considered while deciding whether to run your LLC as a corporation or a partnership. LLC can either have single or multiple members. 

Single member LLCs are considered a “disregarded entity” which means it will be like having a sole proprietorship. They have to file Schedule C along with Form 1040

Multiple member LLCs can have more than one member and are treated as partnerships. Each member will file Form 1065 to report their share of income. However, each partner will be taxed on their individual return. 

You might also be required to file a copy of Schedule K-1 in addition to Form 1065 to report your share of the partnership's income, deductions, credits, etc.

When the LLC that has one or more than one member elects to be treated as a corporation then they must decide whether they will be S-Corp or C-Corp

Unlike C-corps the S-corps are not taxed twice on their profits. They report the income on Form 1120S which usually flows through the personal tax return of the business owners. This is the difference between 1065 and 1120S filers. Having an S-corp is like having the best of both worlds. 

Corporations that do not qualify or didn’t opt for S-Corp will file Form 1120. The company and the owner are treated as separate legal entities, therefore the profits which are taxed at the corporation level will again be taxed when it is distributed as a dividend to shareholders.

In this article, we have looked at what you need to know about 1065 filer vs 1120 filer.  The requirements of the IRS are complex and might create confusion therefore it is always a good idea to consult a tax professional. 

Ines Zemelman, EA
Founder of TFX