What Does Filing Type L Mean
If you’ve come across “filing type L” while preparing or reviewing a business tax return, you might be wondering what it means and how it applies to your situation. Filing type codes, such as “L,” are used by the IRS and tax professionals to classify certain characteristics of tax returns—especially for partnerships and corporations filing Forms 1065 or 1120.
What Is Filing Type L?
Filing type L typically refers to a business return that includes Schedule L, which is the balance sheet section of the tax return. Schedule L appears on:
When a return is labeled as “filing type L,” it means that the taxpayer is required to report or has chosen to report their beginning and end-of-year assets, liabilities, and equity on Schedule L.
When Is Schedule L (Filing Type L) Required?
The IRS generally requires Schedule L for businesses that meet either of the following thresholds:
- Total receipts (gross income) of $250,000 or more, or
- Total assets of $250,000 or more at the end of the tax year.
If your business exceeds either threshold, Schedule L becomes mandatory—and your filing type would be classified as “L.” Even if your business is below the threshold, you can still include Schedule L voluntarily, especially if you want to maintain comprehensive records or anticipate future audits.
Why It Matters
Being classified as filing type L means your return must include more detailed financial disclosures. This allows the IRS to cross-reference your reported income with your business’s balance sheet, retained earnings, and capital accounts. It’s also closely linked to Schedules M-1 and M-2, which explain book-tax income differences and capital movement, respectively.
Conclusion
Filing type L simply means your tax return includes Schedule L, the IRS’s required balance sheet form for businesses of a certain size. It’s an indicator that your business has reached a level of financial complexity that warrants additional reporting. If you’re unsure whether you satisfy the requirements, reach out to us today for full compliance. Dimov Tax is ready to present professional assistance.