small business tax filing extension

Tax season tips on how small business owners can get more time to file their taxes.

Small business owners must file their taxes correctly. A simple mistake could result in penalties that could add up to thousands of dollars or more.

If you haven’t filed your taxes, don’t stress out. Doing it in a rush and under pressure could lead to calculation mistakes, errors, and missed deductions.

Instead, you should file for a tax extension. It will give you the extra time you need to get your taxes right.

This article will explain everything you need to do to file for an extension properly, so you don’t run afoul of the Internal Revenue Service (IRS).

What is a small business tax filing extension?

A tax extension allows individuals and businesses to put off filing a tax return for a defined period of time. It is similar to an extension you’d get for filing your personal tax return. Most companies, with a few exceptions, must file tax returns before April 15 (April 18 this year). An extension provides more time for business owners or the people who file taxes for them to complete the task.

Important note: A tax filing extension is not a tax payment extension. You can extend your deadline for filing taxes, but you still must estimate and pay any taxes you may owe by the April 15 deadline, or you could be forced to pay interest and penalties on the amount you owe if your payment is late.

Do I need to work with a tax professional to get a tax-filing extension?

It’s always a smart idea for small business owners to get tax advice from a tax preparer or certified public accountant (CPA) when making business decisions that could impact taxes or when filing business tax returns. It will help prevent costly errors. However, filing for an extension is relatively straightforward, and you should be able to handle it on your own.

What are the penalties for late filing?

If you submit your taxes after the deadline without filing for an extension, you could be forced by the IRS to pay penalties, late fees, and interest on the money you owe. It could also be a red flag to the IRS, possibly triggering an audit of your taxes.

Do I have to pay to file for an extension?

No, it’s free. You don’t need a debit or credit card to get an extension.

Can I use tax software to file for an extension?

No, you must do it on the IRS website

What tax forms should I fill out for an extension request?

The IRS forms you need to complete depend on your circumstances. The IRS offers the following forms to business owners who want to get an extension on their tax returns:

Form 7004

The IRS Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, otherwise known as Form 7004, allows businesses to request a six-month extension, most years to October 15, for filing an income tax return.

Form 1138

The IRS Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss Carryback, otherwise known as Form 1138, allows corporations that expect a net operating loss (NOL) in the current tax year to extend the time to pay the tax for the immediately preceding tax year.

Form 5588

The IRS Application for Extension of Time To File Certain Employee Plan Returns, otherwise known as Form 5588, helps small businesses get more time to handle their employment taxes.

Some variations of this form include:

  • Form 5500, Annual Return/Report of Employee Benefit Plan
  • Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan
  • Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan
  • Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits
  • Form 5330, Return of Excise Taxes Related to Employee Benefit Plans.

Form 8868

The IRS Application for Extension of Time To File an Exempt Organization Return, otherwise known as Form 8868, gets businesses exempt from federal income tax to receive a three-month extension for filing their tax return.

The length of tax extensions varies depending on the forms you use. The typical amount of time is six months. Because the deadline to file taxes is April 15 (April 18 this year), you may have until October 15 (October 18 in 2022) to file your tax return.

How do I file for a small business tax filing extension?

Follow these steps to do it correctly:

1. Pull together information about your business.

Similar to what you would do when you file your taxes, have the documents and information you’ll need at the ready when filing for an extension. It will save you time because you won’t have to scramble to get each one individually. Depending on the form, you may be required to enter your employer identification number, taxpayer identification (social security) number, and company financial records, including balance sheets, bank records, and income statements.

2. Visit the IRS website and select an extension form

Go to the IRS website to choose one of the four extension forms (Forms 7004,1138, 5588, and 8868) as described in the previous section.

3. Fill out your form

Follow the instructions to complete the form electronically or on a hard copy.

4. Submit the form

Submit your form to the Internal Revenue Service electronically or send a physical copy to the address specified on the IRS website (make sure it’s postmarked April 18 or earlier, this year’s tax deadline).

Can the IRS reject my request for an extension?

Your extension will be granted as soon as you complete and submit the required form. The IRS has no formal review and approval process for extensions.

Small business tax extension frequently asked questions

Here are some FAQs about tax extensions:

Do I need to pay my taxes to get an extension?

According to the IRS, you do not need to pay taxes you may have due to get an extension. However, you may have to pay interest and penalties if you pay what you owe after April 15 (or April 18 this year because the tax filing date has been extended.)

Can I get a second tax extension?

You could get a second extension in the past because the IRS used to offer small businesses a four-month initial extension that could be extended to six months with a second extension. Now the IRS provides a single six-month extension.

Is it considered “bad” to request an extension?

No, it’s not bad to get an extension to file your tax return. You won’t incur penalties or interest if you file by the extended deadline and pay the estimated amount of taxes you expect to owe by the original tax filing deadline (April 18 this year).

Getting an extension can be considered a “good” thing because it gives you more time to prepare your taxes, which can help prevent errors.

Is the tax filing deadline the same for all businesses?

Actually, the deadlines can differ based on how your business is structured and when a business year ends, whether it’s a calendar year cycle or a different one.

  • S corporation: Your tax return or extension is due by the 15th day of the 3rd month after the end of your tax year.
  • C corporation: Your tax return or extension is due by the 15th day of the 4th month after the end of your tax year.
  • Partnership: Your income tax return or extension is due by the 15th day of the 3rd month after the end of your tax year.
  • Sole proprietors, independent contractors, and other business types: For most other businesses, the standard tax filing or extension deadline is April 15, which has been pushed to April 18 this year. To avoid issues, check the IRS website or with a tax professional to find out for sure when you need to file your taxes or request an extension.

Note: For single-person operations, like sole proprietorships, completing a return is simpler and more like filing an individual income tax return.

Note: LLCs are unique. To file for an LLC extension, file Form 7004: Application for Automatic Extension of Time to File Certain Business Income Tax Information and Other Returns.

When you request a partnership extension, your LLC will get an automatic five-month extension to file Form 1065. For a partnership, Form 1065 is submitted instead of Form 1120S. Form 4868 is filed by individuals who need to request an extension for single-member LLCs.

Are there any other small business tax extension issues I should be aware of?

The IRS may hit your business with a costly penalty and interest charges if you:

  • underestimate your taxes
  • file your return late
  • do not submit the required information by the due date.

Do states offer tax filing extensions?

State guidelines for filing extensions vary. In many cases, unless you owe state taxes, your federal extension can be used to extend your state return filing, as well. Check with your state’s taxation agency or a small business tax expert in your state to find out if your state offers tax filing extensions and, if so, how to get one.

If you have any doubts about filing your small business taxes correctly and on time, you owe it to yourself to get an extension. It’s a good way to ensure your return will be correct, so you avoid penalties and other complications. You’ll also feel more confident that you can max out your tax deductions and take advantage of tax credits, so you get the biggest tax refund possible if you have one coming to you.

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