Small Business Guide to Tax Extensions
With one week left to go until the April 18 tax deadline, businesses that haven’t yet finished their returns have two options: get serious or get tax extensions. If you’re still scrambling to prepare your return at this point, or you haven’t even started, an extension is probably your best bet. With an extension you can get up to six additional months to get your act together, and you don’t even need an excuse to get one! Here are some things to keep in mind if you are thinking about filing for an extension.
The Catch: Remember that an extension only applies to the return itself, not to the payment of taxes. You are still responsible for paying any tax due by the April 18 deadline even if you are approved for an extension. The IRS can and will require you to pay interest and other fines if you do not pay in full on time. If you’re not sure how much you owe, pay more than what you think is due to avoid being penalized.
If you are unable to pay your taxes, but you have completed your tax return, you should not file for an extension. File your return on time and pay what you can to minimize penalties, and call the IRS at 800-829-1040 to discuss your options.
The Forms: Most business entities including partnerships, multi-member LLCs and corporations can fill out IRS Tax Form 7004 to request a five-month extension. Sole proprietors and single-member LLCs should use IRS Tax Form 4868, which will extend both the personal and business tax deadlines by six months.
As if filing for an extension weren’t easy enough already, there are a number of online tools that can help you finish the task in just minutes. One such service is FileLater, an IRS authorized E-file provider that specializes in small business extensions. According to the company’s website, over 98% of the extensions they file are approved.
The State Tax Return: If you’re filing for an extension for your federal tax return, chances are you also need more time to work on your state return. In some states, if you are approved for an extension for your federal tax return, you’re automatically approved for an extension at the state level. In other states, it’s not so easy. The IRS and FileLater both offer information on state laws regarding extensions on their websites.
The Deadline: You need to file for an extension by the date your return is due.
If you do decide to file for an extension, you’ll be in good company. According to the IRS approximately 10 million businesses file for extensions every year.