There’s still time to file a tax extension if your business is taxed as a sole proprietorship or C-corporation.
Let’s get right into it with answers to some frequently asked questions.
What are the most common reasons for filing a tax extension?
You should consider filing an extension if you need additional time to
- find and organize financial documents;
- take advantage of tax credits and deductions; and
- ensure that the information on their tax return is accurate.
Remember that filing a tax extension is neutral from the perspective of the Internal Revenue Service (IRS). It does not increase your chance of being audited, and there are no penalties for filing an extension.
Filing an extension is always preferable to filing an incomplete or incorrect tax return.
When is the tax extension deadline for my business?
No matter your business structure, the deadline to apply for an extension is the same date as your filing deadline.
- April 18, 2023: Sole proprietorships (single-member LLCs) and C-corporations have until this Monday, April 18, to file a business tax extension.
- March 15, 2023: Partnerships, multi-member LLCs, and S-corporations filed on March 15, 2023.
Regardless of your business tax extension deadline, you can still file an extension for your personal tax return on or before April 18.
What forms do I need to file a tax extension?
Sole proprietorships and C-corporations use Form 4868 to file a tax extension. All other businesses use Form 7004.
The IRS provides instructions, and the complexity varies according to the complexity of your financials. For most business owners, I would advise consulting a tax professional.
What’s the best way to submit my forms?
You can use the Electronic Federal Tax Payments System (EFTPS) to make tax payments for your federal return, but you will have to enroll in a process that can take 5-7 business days. This is not a good option (at the date of this publication).
Or, you could send in your form and a check, as long as the envelope is postmarked before the due date. Around 3% of mail is lost by the United States Postal Service (USPS), so be sure to send your extension via certified mail.
If I file an extension, when is my tax return due?
Tax extensions provide an additional six months for businesses to complete and file their tax returns.
For businesses that filed tax extensions on March 15, the extended deadline for filing business tax returns is September 15.
It’s October 16 for businesses that have until Monday, April 18, to file an extension.
Does an extension give me more time to pay taxes?
No. Understanding the difference between tax payment and tax filing concerning tax extensions is essential. Non-payment will incur a late payment penalty of 0.5% per month, as well as interest applied to your tax bill.
An extension will provide you with additional filing time. But if you owe taxes, your payment is due on March 15 and April 18, depending on your business structure.
How do I avoid filing an extension in the future?
If you are a business owner, you’re busy. The best way to secure a timely and accurate tax return is to hire a qualified CPA firm that provides tax planning and accounting.
There’s still time to file, so I recommend an extension if you feel you do not have the information and documentation necessary to file an accurate tax return. The same recommendation applies if you believe your business qualifies for tax credits and deductions. When in doubt, stay on the safe side.
Jeremy A. Johnson, CPA