Filing a Tax Extension for Your Business
- The deadline to file a tax extension varies based on the type of business you own. Most businesses need to file an extension by March 15th or April 15th.
- Depending on the type of business you own, you’ll either need to file Form 7004 or Form 4868 to get an extension. As a general rule, Form 4868 is used when you report your business income on your personal tax return.
- Filing a tax extension for your business can help you improve your filing accuracy, avoid penalties, and save money.
Tax season can be a stressful time for business owners. With the myriad of financial documents to gather, calculations to make, and forms to fill out, it’s no wonder that many entrepreneurs feel overwhelmed. Fortunately, there’s a lifeline available in the form of tax extensions.
In this comprehensive guide, we’ll delve into the world of tax extensions for businesses. We’ll explore the reasons why businesses might need an extension, the step-by-step process to request one, and the important deadlines to keep in mind. By the end of this article, you’ll have a clear understanding of how tax extensions work and how they can be beneficial for your business.
What is a Tax Extension for Your Business?
A business tax extension works similarly to filing a personal tax extension. Essentially, you need to fill out your request for an extension by the tax filing deadline. If the extension is approved, then you’ll receive an extra six months to file the tax return for your business.
Just like a personal tax return, you’ll also need to pay the taxes you expect to owe for your business when you file your extension in order to avoid penalties and fees.
The form you have to submit to request an extension and the deadline to submit your extension depends on the type of business you have.
What is the Deadline to File a Tax Extension for Your Business?
Just like a personal tax extension, the deadline to file an extension for your business is the day that your taxes are due for your business. However, the due date of your business tax return varies based on what type of business you have.
Keeping track of all the different tax due dates can be difficult, so we created this table below to help you keep things straight.
|Business Type||Tax Return Due Date||Tax Return Due Date if Extension is Approved|
|S Corporation||15th day of the third month after the end of the tax year||15th day of the ninth month after the end of the tax year|
|C Corporation||15th day of the fourth month after the end of the tax year||15th day of the tenth month after the end of the tax year|
|Partnership or LLC taxed as a partnership||March 15th||September 15th|
|Schedule C, Sole Proprietorship||April 15th||October 15th|
If any of the above dates fall on a weekend or federal holiday, then the due date is pushed to the next business day.
How to File a Tax Extension for Your Business
Filing a tax extension for your business is a fairly straightforward process that can be done in a few simple steps:
- Estimate the taxes you owe – Unfortunately, getting a tax extension doesn’t mean extra time to pay your taxes. You’ll want to estimate how much you owe and pay that amount when submitting your tax extension to avoid penalties and fees.
- Select the right extension form – When filing a tax extension for your business, you’ll either need to file Form 7004 or Form 4868. Keep reading to find out which form your business should use.
- File the extension by the deadline – As mentioned above, the deadline to file an extension for your business may be different than the April 15th deadline for personal taxes.
While you can file an extension via mail, it’s quicker to file a tax extension for your business online.
Which Form Should I Use to File a Tax Extension for My Business?
To make matters more confusing, different types of businesses require different types of forms. Depending on which type of business it is, you’ll need to use one of the following two forms to request an extension to file your taxes:
Businesses That Use Form 7004
As a general rule, most businesses will need to file Form 7004 in order to request a tax extension. Essentially, if you aren’t reporting your business’s income on your personal tax return, you’ll need to use Form 7004.
The types of businesses that will need to file Form 7004 to file a tax extension include:
- Partnerships and multi-member LLCs
- C Corporations
- S Corporations
As mentioned above, S corporations, Partnerships, and Multi-member LLCs need to file Form 7004 by the third month following the end of the tax year. In contrast, C corporations have until the fourth month following the end of the tax year. For most businesses, this is March 15th and April 15th, respectively.
In order to complete Form 7004 for your business, you’ll need:
- The business name, address, and contact info
- The business entity type and tax identification number
- The estimated tax liability
Businesses that Use Form 4868
Some business types are allowed to request an extension using Form 4868. This should only be done if you are planning on reporting your business income as part of your personal tax return on Schedule C of Form 1040.
The types of businesses that use a Form 4868 to file a tax extension include:
- Sole proprietors
- Single-member LLCs
As mentioned above, the due date for filing Form 4868 is April 15th.
What are the Benefits of Filing a Tax Extension for My Business?
As a business owner, you want to make sure that you make the most of every dollar invested into the well-being of your business. Filing a tax extension could potentially save your business a lot of money. Here are just a few of the ways your business can benefit from filing a tax extension.
Avoid Unnecessary Penalties
The IRS can hit your business with a failure to file a penalty if you don’t file an extension or file your taxes by the deadline. The failure to file penalty is 5% of your unpaid taxes per month, as long as your tax return remains unfiled.
The failure-to-file penalty does max out at 25% of your taxes owed, but that can become a large fine, depending on how much your business owes in taxes. Avoid the unnecessary penalty by filing a tax extension before the deadline.
Improve Filing Accuracy
Rushing to file taxes for your business could result in you missing out on thousands of dollars in tax savings. If you need extra time to review your expenses and look for potential tax credits, it’s better to file an extension than rush through your return.
Avoid Extra Tax Preparation Fees
A lot of small businesses outsource completing their tax return to a tax accountant. While this may be a good way to find extra savings, accountants tend to raise their rates as the tax deadline approaches.
If you file for an extension, you may be able to find a good accountant for a lower rate outside of the busy tax season. In addition, that accountant may have more time to spend combing through your business's potential tax savings due to lower demand.
Filing a Tax Extension for Your Business
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