Filing a business tax return annually is mandatory for business owners. However, there are instances when gathering financial documents or filing returns on time becomes challenging. In such situations, business owners can opt for filing a tax extension, which grants them an additional five or six months (depending on business type) to file their returns. It is important to gain complete knowledge of how to file an extension for business taxes accurately.
However, filing tax extensions doesn’t delay the obligation to pay taxes. This means you must still pay your taxes on time to avoid penalties or interest. The best part is you can easily file your extension without even stating the reason to the IRS.
While filing an extension for business taxes, you need to consider certain things. Here are the steps to follow:
While you can buy the time for a few months to file a return by opting for an extension, the IRS doesn’t permit you to delay the tax payments you owe. Failure to pay your taxes on time would invite heavy penalties and interest.
Therefore, it is essential on your part to calculate your taxes accurately by gathering financial documents to make payments by the original deadline.
Depending on the business entity type, the dates and the associated tax forms are as follows:
| Business Entity Type | Form | Due Date |
|---|---|---|
| Partnerships | Form 1065, U.S. Return of Partnership Income | March 15 |
| Limited Liability Companies (LLCs) | Form 1065, U.S. Return of Partnership Income | March 15 |
| S-Corporations | Form 1120S, U.S. Income Tax Return | March 15 |
| Sole Proprietorships | Schedule C, Profit or Loss From Business | April 15 |
| Single-Member LLCs | Schedule C, Profit or Loss From Business | April 15 |
| C Corporations | Form 1120, U.S. Corporation Income Tax Return | April 15 |
When it comes to paying taxes, the IRS has very strict rules and regulations. If you underestimate the tax amount, you will be imposed with heavy interest charges by the IRS. While knowing how to file an extension for business taxes, you need to keep this point in mind.
So, when you estimate your tax amount, you should always focus on paying a little extra than what you paid the previous year. And you need not stress about making bigger payments as you will get a refund for the extra payment you made.
Also, you could use the additional money to file your next year’s taxes. Seeking business tax solutions from a professional tax service would help you maintain the accuracy of tax payments effectively.
Once you are done paying your taxes, the next step is selecting the right extension form as per your business entity type. Commonly, businesses including partnerships, multi-member LLCs, S corporations, and C Corporations go for Form 7004.
On the other hand, sole proprietors and single-member LLCs don’t choose separate business tax returns. They use Schedule C to report their business income or losses. Hence, these business entities opt for Form 4868 to request a personal extension.
It doesn’t require much effort to complete the extension form. The IRS doesn’t demand you to sign the extension request or offer an explanation for seeking more time.
After filling in the extension request form, a major part of how to file an extension for business taxes is submitting the form using any of the following options:
Businesses commonly opt for the Electronic Federal Tax Payments System (EFTPS) to handle federal tax payments.
To utilize this convenient option, you can either enroll online or contact EFTPS customer service at 800-555-4477. This system streamlines the process by enabling direct debits from business bank accounts.
If you haven’t used this option ever and are using it for the first time, the IRS will mail a personal identification number (PIN) to your IRS address to validate your details. It takes around 5-7 days for completion so it’s wise to plan tax payments with this method earlier.
The second option you have is e-filing by using tax software or through a tax professional. For making your payments via electronic funds withdrawal, you need to file Form 7004 electronically.
Also, you need to submit your business bank account’s routing and account number, along with signing Form 8878-A for filing Form 7004.
If e-filing isn't your preference, you have the option to file on paper. Simply complete Form 7004 and mail it to the IRS using certified mail along with your payment.
You must refer to the IRS instructions for Form 7004 to look for mailing addresses for delivering Form 7004. It’s because the mailing address varies as per the tax form and the state of a business.
When considering how to file an extension for business taxes, remember the deadline for submission. Remember to file your extension by the original tax payment deadline.
Following this, you also need to file your return by the extended deadlines which vary as per the business entity type:
If you’re clueless about how to prepare a tax return, you can seek the help of tax professionals to do this task.
The dates for the extended deadline would shift to the next working day if the original extension date falls on a holiday.
Failure to pay your taxes and return on time will result in penalties imposed by the IRS as follows:
The total penalty percentage for both penalties is 5% for each month or portion of a month that the return is late. If calculated individually, the failure to file penalty is usually 5% of the unpaid tax. And for the failure to pay, the penalty lies at 0.5% per month or a part of a month.
However, you should note that the maximum limit of penalty for not filing is 25% of the unpaid taxes. Additionally, the late payment fine continues to increase until it reaches the maximum percentage of 25%.
So, you must care about knowing how to file an extension for business taxes. By doing so, you would avoid unwanted penalties.
Now you know the process and importance of filing for an extension for business taxes. During this procedure, don’t forget to keep in mind the state-specific form while dealing with state income taxes.
The federal extension you file is acceptable in some states. But some states don’t accept that. To simplify it, you should consider expert tax solutions to meet your taxation needs.
At Aspire Tax, you can avail of tax professionals with years of knowledge and experience in yielding practical tax solutions.
We can help you deal with your taxation work seamlessly, allowing you to file your return or pay tax by the deadline.
One must carefully deliberate on a business structure while establishing a new business.....
Read MoreAs a small business owner or entrepreneur, you have the responsibility of paying a portion of your income to the government....
Read MoreAn R&D tax crеdit is a powеrful tax incentive aimеd at fostering innovation and tеchnological advancеmеnt...
Read More
