Most business taxes are due by March 15. If you missed that deadline, contact me immediately. However, if your business is a C-Corp, you can still file an extension.
Today, we’ll dive into how to file a business tax extension, the deadlines, and how to avoid an extension next year.
A business tax extension is an extension to file your business tax return, not an extension to pay taxes owed.
It’s a common misconception that filing a business tax extension request extends your time to make tax payments.¹ In reality, Uncle Sam will wait on the paperwork but not the cash.
Use last year’s income tax return to estimate your tax liability for this tax year.
Tax preparation software usually features tools to estimate your annual, quarterly, or more frequent payments. The business tax extension provides extra time to file a tax extension, but you must include an estimated tax payment when you submit your extension request to avoid penalties.
Make your payment by April 15th.
Pay your taxes by the original due date to avoid penalties and interest charges. Most businesses need to pay estimated taxes quarterly. Whether you pay for the full year or the fourth quarter, the previous tax year’s due date is the same.
You can make payments online through the IRS payment portal. This quick and secure method of settling your estimated taxes is the best way to ensure the correct amount of money is going to the right place at the right time.
For assistance in your federal tax return and calculating your estimated tax liability, visit the IRS’s Estimated Taxes page.²
File a business tax extension by submitting IRS Form 7004.
Filing an extension to submit your business tax return requires submitting the proper form to the IRS before the tax filing deadline. IRS Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns,” is your ticket to getting a little more time to get your tax affairs in order.³
The extended due date for business taxes is October 15th, 2024.
The tax extension typically extends the April 15th deadline by six months. Business owners who file an extension have until October 15th to organize their financial records.
The IRS’s official site has all the most up-to-date information for more detailed guidance on filing extensions.
Mark these important dates on your calendar:
- Original Filing Deadline: April 15th, 2024.
- Payment Deadline: Still April 15th, 2024, for estimated taxes owed.
- Extended Filing Deadline: October 15th, 2024, offering a substantial period to get your documents in order.
Miss any of the deadlines above, and you’ll face fees or penalties that come with interest.
Missing a deadline can be costly, but you can minimize the damage if you react fast.
The IRS’s page on Understanding Penalties and Interest⁴ offers detailed information on how to file a business tax extension form. Consider these tips for filing an extension request:
1. File and pay as soon as you can.
The clock doesn’t stop on April 15th. The failure-to-file penalty is 5% of the unpaid tax for each month the tax return is late—up to a maximum of 25%.⁵ The failure-to-pay penalty is 0.5% of the due tax for each month or part of a month that the return remains unpaid, up to 25%.
You will be charged interest on taxes not paid by the due date, even if an extension of time to file is granted. Rates are determined quarterly, typically around 3% to 5% annually. Act swiftly to file and pay to keep these additional costs⁶ as low as possible.
2. Communicate with the IRS.
If you foresee missing a tax deadline, contact the IRS or a tax expert. The IRS may offer options such as payment plans to help manage your tax liabilities. For advice on how to proceed and whom to contact, visit the IRS Contact Us page.⁷
3. Stay on top of filing next year.
Bookmark the IRS’s online tax calendar⁸ to stay up-to-date on all your tax forms and deadlines, or create an internal document or calendar with the deadlines. Deadlines should be integrated into your bookkeeping and tax processes.
4. Contact an experienced CPA immediately if the IRS sends you a notice.
Better yet, get help with your taxes before you start missing deadlines. Yes, I’m a CPA. As such, I am interested in helping your business avoid these costly mistakes. Businesses that do not manage to pay what they owe fail, and failed businesses don’t need accountants.
Contact me if you need to file an extension, and we’ll get back on track.
Schedule a discovery call here.
Talk soon,
Jeremy A. Johnson, CPA
References
- Extension of Time To File Your Tax Return | Internal Revenue Service [Internet]. www.irs.gov. Available from: https://www.irs.gov/forms-pubs/extension-of-time-to-file-your-tax-return
- Estimated Taxes | Internal Revenue Service [Internet]. Irs.gov. 2018. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
- About Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns | Internal Revenue Service [Internet]. Irs.gov. 2017. Available from: https://www.irs.gov/forms-pubs/about-form-7004About Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns | Internal Revenue Service [Internet]. Irs.gov. 2017. Available from: https://www.irs.gov/forms-pubs/about-form-7004About Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns | Internal Revenue Service [Internet]. Irs.gov. 2017. Available from: https://www.irs.gov/forms-pubs/about-form-7004
- Penalties | Internal Revenue Service [Internet]. www.irs.gov. Available from: https://www.irs.gov/payments/penalties
- Failure to File Penalty | Internal Revenue Service [Internet]. www.irs.gov. Available from: https://www.irs.gov/payments/failure-to-file-penalty
- Interest | Internal Revenue Service [Internet]. www.irs.gov. Available from: https://www.irs.gov/payments/interest
- Contact your local IRS office | Internal Revenue Service [Internet]. www.irs.gov. [cited 2024 Mar 12]. Available from: https://www.irs.gov/help/contact-your-local-irs-office
- Online Tax Calendar | Internal Revenue Service [Internet]. www.irs.gov. [cited 2024 Mar 12]. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/online-tax-calendar