What does the Closure Announcement of Bench.co mean for your ecommerce Taxes?

‍If you're wondering how to file taxes after Bench.co shutdown and ensuing drama, you're not alone. This guide will help you navigate your tax obligations and explore Bench Accounting alternatives for 2024 taxes for ecommerce.

Understanding Tax Obligations After Bench's Closure and ensuing drama

Ben Franklin famously said, “Nothing can be said to be certain, except death and taxes.” Other versions of the quote qualify it as "and I am not sure about the former”.

In any event, taxes are an unfortunate part of our modern society, and there is no way around them. When taxes are combined with a company's death (Bench), all hell breaks loose.

Now, Bench's shutdown announcement and the ensuing drama of Bench Bench acquisition by employer.com, has many implications, one of which is how you, as a former Bench customer, are going to file your taxes for 2024? As you consider your Bench accounting alternatives for eCommerce, it's crucial to understand the various tax obligations and deadlines that still apply to your business.

Just as an intro (and without getting into too much detail), there are many types of taxes that you will face when running a business. One thing's sure - understanding business tax deadlines in 2025 and the requirements for different business structures is essential for compliance.

We will focus on Federal tax and State tax (the other significant tax you will face as an eCommerce seller is sales tax, but that's for another time).

Federal and State Tax Requirements for eCommerce Businesses

Federal tax is paid on the federal level and is impacted by your business's setup. Understanding C corporation tax requirements and sole proprietorship tax preparation is crucial here.

Staying on a high level, you generally pay as an individual when you run your business as a sole proprietorship, S corp or pass through LLC (with varying implications for self-employment tax), and as a corporation, when you are a C corporation or an LLC electing to be taxed as a C corporation.

Individuals are taxed on their income based on tax brackets (up to 37%), with additional possible Medicare tax, and corporations' income is taxed as the corporate income tax rate (currently 21%; Trump has been talking of reducing it to 15% for companies with manufacturing in the US), with additional taxation upon dividend distribution to shareholders.

Business Tax Nexus: Physical and Economic Presence

Unlike Federal income tax, State income tax is paid based on a business nexus to that state. Unlike sales tax nexus, which focuses on customer transactions, income tax nexus is typically based on the business's physical presence (such as offices, warehouses, or employees) or economic presence (such as revenue thresholds or significant sales in the state).

Physical presence can be established through various factors. When considering multi-state business tax compliance and economic nexus for eCommerce businesses, keep these key elements in mind:

• Remote Employees: Understanding the remote employee tax nexus is crucial, as hiring employees who work remotely from different states can trigger a nexus in those states.
• For instance, having a sales representative or a remote customer service team member in a state can be enough to establish an income tax nexus.
• Facilities and Inventory: Physical locations, such as warehouses, distribution centers, or offices, also create a physical presence.
• For e-commerce businesses that store inventory in fulfillment centers or warehouses (e.g., Amazon FBA locations), nexus may be triggered in those states, even if no employees work there directly.
• Retail Outlets or Pop-Up Locations: If a business occasionally operates in pop-up stores or conducts in-person sales events in a state, this can also create a physical nexus.

Other means for creating nexus are based on economic activity (such as California's economic nexus laws for state tax purposes.)

Critical Tax Filing Deadlines for 2025

When are the filing deadlines?

Understanding business tax extension deadlines in 2025 is crucial for your planning. Here are the key dates to remember:

• March 17, 2025 S corp tax deadline - This is when S corporations and partnerships need to file their taxes. For LLC tax filing without bookkeeper situations, these deadlines are particularly important to note.
• April 15, 2025, is the business tax deadline. Individual taxpayers, sole proprietors, and C corporations must file their taxes on this date.

Due to the deadlines and the fact that you are a former Bench client and currently do not have your 2024 financials, you may be interested in filing an extension. This Form 7004 tax extension filing guide will help you navigate the process, which is especially important for partnership tax extensions.

To do this, you must complete Form 7004 to request an automatic extension of time to file certain business income tax, information, and other returns. This form provides an extension of six months to file your tax returns and is essential for businesses that need more time to gather all the necessary financial information.

Complete Guide to Filing Form 7004 Tax Extensions

Form 7004 filing deadline 2025 considerations:

Here are five steps to help you file your Form 7004 to get your extension:

Step-by-Step Process for Tax Extension Filing

Step 1: Determine Your Eligibility

‍ Before you start filing your Form 7004, ensuring that your ecommerce brand is eligible for an extension is important. Generally, the IRS grants automatic extensions for businesses that cannot file their tax returns by the original deadline.  However, checking the eligibility criteria for your specific situation is essential.

In order to qualify, you need to:

• ‍Complete Form 7004 properly
• Make a proper estimate of any taxes you owe
• File Form 7004 before or on the deadline of the form concerning which you need an extension 

Ensure you pay any tax due: Form 7004 doesn’t extend the time to pay any tax due. In other words, If the entire tax liability isn't paid by the original deadline, the IRS will assess penalties and interest on the unpaid amount, even if Form 7004 was filed.

Step 2: Gather the Required Information

‍Once you've confirmed your eligibility, the next step is gathering all the necessary information to file Form 7004. This includes basic information about your business, such as your name, address, and tax identification number, as well as details about your tax liabilities, estimated tax payments, and any credits you plan to claim.

Step 3: Fill Out Form 7004

Now it's time to fill out Form 7004. You can download the form from the IRS website here, or if you already use Finaloop for your taxes, we can file it for you. Double-check all the information you enter to ensure accuracy and avoid any mistakes that could lead to delays or penalties.

Part 1

‍Specify which form you’re filing for.

There are 36 to choose from, but here are the main ones that should be relevant to you:‍

• Form 1065 - the tax return filed by partnerships or limited liability corporations (LLC) filing as partnerships. This is particularly important for those managing LLC tax filing without bookkeeper support after the Bench transition.
• Form 1120 - the tax return used by C corporations.
• Form 1120-S - the tax return used by S corporations.

Part 2

• Specify whether you are a foreign corporation with no office or place of business in the US.
• Specify whether you have any corporate subsidiaries.
• Specify which tax year you're filing for.
• Specify whether you use fiscal or calendar year for your accounting.
• Specify your estimate of taxes owed.
• Specify how much tax you've paid so far this year.
• Specify if there are any taxes left to be paid.

Step 4: File Form 7004

Especially since you will soon have to change tax preparation service provider, remember: Once you've completed Form 7004, you can file it electronically or mail it to the IRS. E-filing is generally faster and more convenient, but you can also choose to send a paper form by mail if you prefer.

Step 5: Follow Up and Prepare for Tax Season

After filing Form 7004, follow up with the IRS to ensure your extension has been granted. As you transfer business bookkeeping from Bench, use this time to establish a business financial records transition guide and prepare for tax season. This includes gathering all necessary financial information and ensuring your books are current.

Conclusion: Transitioning Your Business Records from Bench

The closure of Bench and the drama that came after may leave you with a feeling of uncertainty. That's normal. However, creating a thorough transition plan for business financial records will help you maintain continuity through this change.

As you transfer business bookkeeping from Bench and work on your business financial records transition guide, remember to save tax documents from Bench for future reference.

It takes time to process loss. With that said, it is important to be proactive and get started on finding an alternative bookkeeper (and if you’re in the eCommerce space, that would be FInaloop), as well as thinking of finding an accountant for tax extensions (again, if you are in the eCommerce space, that would be Finaloop).

Finaloop is here to help clients affected by the Bench.co closure and drama:

• Building (as you're read this) a dedicated Bench-to-Finaloop migration tool
• Offering you 2024 catch-up services FOR FREE
• Guaranteeing 1.5-week delivery time for full-year financials (cash/accrual accounting) with a money-back guarantee

Talk to one of our ecommerce finance experts to get all the support you need - with our dedicated onboarding experience to ex-Bench clients.