A disregarded entity is a business entity that is disregarded for federal income tax purposes. Instead, income from the business is included on its owner’s income tax return.
Filing Requirements
The following businesses must file a Montana Disregarded Entity Information Return (Form DER-1):
- Single Member Limited Liability Company (SMLLC)
- An SMLLC is treated as a disregarded entity, whether formed in Montana or in another state or country.
- Exception: An SMLLC doesn’t need to file a Form DER-1 if it is owned by an individual who was a full-time Montana resident during the tax period.
- IRC § 761 Electing Partnership
- A section 761 electing partnership is required to file Form DER-1 each year the entity does business in Montana or has Montana source income.
- Qualified Subchapter S Subsidiary
- Any corporation described in IRC § 136(b)(3) whose parent elects to have the subsidiary treated as a qualified subchapter S subsidiary, is required to file Form DER-1 each year the entity does business in Montana or has Montana source income.
- Qualified Real Estate Investment Trust Subsidiary (REIT)
- Any qualified REIT as defined in IRC § 856(i)(2) with Montana income and assets, liabilities, income, deductions, and credits included on its parent REIT’s federal return must file Form DER-1 before its parent REIT’s return due date.
- Real Estate Mortgage Investment Conduit(REMIC)
- Every unincorporated REMIC as defined in IRC § 860D with Montana income must file a copy of its federal Form 1066, Real Estate Mortgage Investment Conduit Income Tax Return, before the federal due date, including extensions.
- Generally, REMICs must file the Form 1066 by April 15. However, if the entity files its final return, Form 1066 is due by the 15th day of the 4th month following the date the REMIC ceased to exist.
Due Dates and Extensions
| If the disregarded entity is a: | Then the Form DER-1 is due: | |
|---|---|---|
| If the due date falls on a holiday that defers a filing date as recognized by the IRS, the return may be filed on the first business day after the holiday. | ||
| Single Member Limited Liability Company owned by a: | C corporation, S corporation, Partnership, or Real Estate Investment Trust (REIT) | On or before the 15th day of the third month following the close of the owner's annual accounting period |
| Qualified Subchapter S Subsidiary | On or before the due date of the parent S corporation's information return | |
| Qualified REIT Subsidiary | On or before the due date of the parent REIT's information return | |
| Individual, Estate, Non-grantor Trust, or Real Estate Mortgage Investment Conduit (REMIC) | On or before the 15th day of the fourth month following the close of the owner's annual accounting period | |
| Electing IRC § 761 Partnership | On or before the 15th day of the fourth month following the close of the owner's annual accounting period | |
| Any other Single Member LLC not described above | On or before August 31 | |
| IRC § 761 Electing Partnership (Syndicate, Group, Pool, Joint Venture or other Unincorporated Organization) | On or before the 15th day of the fourth month following the close of the owner's annual accounting period | |
| Qualified Subchapter S Subsidiary as defined in IRC § 1361(b)(3) | On or before the 15th day of the third month following the close of the owner's annual accounting period. | |
| Qualified Real Estate Investment Trust (REIT) subsidiary as defined in IRC § 856(i)(2) Real Estate Mortgage Investment Conduit (REMIC) as defined in IRC § 860D | See Who must file a Disregarded Entity Information Return (Form DER-1) |
|
Extension Deadlines
Montana grants disregarded entities an automatic filing extension if the owner has a valid federal extension.
The extension is due the same day as the federal extension.
If the owner doesn’t have a federal filing requirement, the disregarded entity has an automatic six-month extension.
Extensions are for returns only. All payments must be made by the original due date. Any payments made after the original due date may be subject to uniform penalties and interest.
Amending Your Return
If you have discovered your original Montana Disregarded Entity Information Return (Form DER-1) is incorrect or if there is an error on the owner’s federal return, you must file an amended return.
Amended returns must be filed within 90 days of filing an amended federal return or receiving a notification of correction from the IRS.
To file an amended return:
- Complete Form DER-1 again, marking the “Amended Return” box on the form
- Include all forms and statements explaining why you are amending the return
- Be sure to complete the new Form DER-1 using the corrected amounts
Amended Returns and Payment Penalties
When you mark the “Amended Return” box on the Form DER-1, you are automatically requesting to have the late payment penalty waived on any increased tax liability.
To qualify for the penalty waiver, you must pay the increased tax liability and interest in full.
See Late Fees, Interest, and Penalties for information on how to figure interest.