If your business operates as a partnership, an LLC taxed as a partnership, or an S corporation, it falls under the category of a pass-through entity. These structures are designed so that profits, losses, deductions, and credits pass directly to the owners, who then report them on their individual federal income tax returns. While pass-through entities generally don’t pay federal income tax at the business level, they still carry important filing obligations—and recent tax law changes make this filing season especially important.
Below is a clear breakdown of what pass-through business owners need to know for the 2025 tax year, including deadlines, required forms, key reporting documents, and significant tax law updates that may impact your return.
Key Filing Deadline: March 16, 2026
Even though pass-through entities typically don’t owe federal income tax directly, they are required to file annual federal income tax returns to report activity to the IRS.
- Partnerships and LLCs taxed as partnerships must file Form 1065, U.S. Return of Partnership Income.
- S corporations must file Form 1120-S, U.S. Income Tax Return for an S Corporation.
For businesses operating on a calendar-year basis (which applies to most entities), the deadline to file 2025 federal returns is March 16, 2026, since March 15 falls on a Sunday.
Extension Option
If additional time is needed, businesses can request an automatic six-month extension by filing Form 7004 no later than March 16, 2026. This extension moves the filing deadline to September 15, 2026.
Keep in mind: extending the business return often means owners will also need to extend their individual returns to October 15, 2026, since personal filings depend on information provided by the business.
Schedules K-1: Critical for Owners
Each year, pass-through entities must prepare and distribute Schedule K-1 forms to their owners. These schedules outline each owner’s share of income, deductions, credits, and other tax items.
Schedules K-1 may be delivered electronically and must be included with the entity’s federal return. Because owners rely on these forms to complete their personal tax filings, timely preparation is essential.
If the entity files an extension, the deadline for issuing Schedules K-1 is also extended to September 15, 2026. Delays at the business level often create bottlenecks for individual tax filings, making early planning especially valuable.
Major Tax Law Updates Affecting 2025 Returns
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced several provisions that directly impact pass-through entities. Here are three changes that business owners should pay close attention to:
1. Expanded First-Year Depreciation
The OBBBA permanently reinstated 100% first-year depreciation for qualifying assets acquired and placed in service after January 19, 2025. Prior to this legislation, full bonus depreciation had not been available since 2022.
In addition, for tax years beginning in 2025:
- The maximum Section 179 expensing limit increased to $2.5 million.
- The phaseout threshold now begins when asset purchases exceed $4 million.
The law also introduced 100% first-year depreciation for certain nonresidential real estate classified as qualified production property, which generally includes factory and manufacturing buildings.
2. Immediate Deduction for R&E Expenses
Under the OBBBA, eligible domestic research and experimental (R&E) expenditures paid or incurred in tax years beginning in 2025 and later can now be fully deducted in the year incurred.
Previously, these costs were required to be amortized over five years. The new rules also provide flexibility for prior years:
- Eligible small businesses may elect to apply immediate expensing retroactively to tax years beginning in 2022, 2023, or 2024.
- Taxpayers with unamortized R&E costs from 2022–2024 can elect to deduct the remaining balance over one or two years starting in 2025.
3. More Favorable Business Interest Expense Rules
For tax years beginning in 2025 and beyond, the OBBBA permanently adopted more favorable rules for calculating deductible business interest expense.
While many small and midsize businesses are exempt from the interest expense limitation rules, eligibility depends on specific financial thresholds and entity characteristics. A professional review is recommended to confirm how these provisions apply to your business.
Why Early Planning Matters
With a March 16 filing deadline approaching—and significant tax law changes in play—this is not a filing season to put off until the last minute. Even if you plan to extend, action must be taken by the original due date to avoid penalties and compliance issues.
Proactive planning helps ensure:
- Accurate and timely filing of business returns
- On-time delivery of Schedules K-1 to owners
- Optimal use of new depreciation and deduction rules
- Smoother coordination between business and individual tax filings
If you operate a pass-through entity and want guidance on filing requirements, extensions, or how recent tax law changes may affect your situation, the team at Botwinick & Company is here to help. Contact us today to start preparing for the 2025 filing season with confidence.
