Sometimes, businesses get late or miss the deadline for filing tax returns due to unprecedented circumstances. If you forget to file a tax return, it could bring potential penalties. In such cases, business tax extension plays a crucial part. A business tax extension brings you extra time to file your tax return eliminating the chance of any penalty.
We have recognized that this is an evergreen issue many small businesses face. Recognizing this, we have filled this post with concrete and well-researched content to provide solutions.
A business tax extension is an opportunity to get your files in order. It is an opportunity to estimate your tax payment carefully and pay the amount within the deadline. When the IRS grants a business tax extension date after the request, you must be aware of your business type. This is because different types of businesses have different tax extension ranges. For instance, partnership businesses have five months from April (deadline) until September (Tax Extensions for Businesses in 2023).
Preparing Tax Extensions for Businesses
A business can request an extension if it needs more time to submit its taxes. This also affects individuals, although their dates, regulations, and forms are different.
File an IRS tax extension, whether individual or business; it is important to remember that an extension only moves the due date for the tax return. The deadline for filing taxes is unaffected. You do not get extra time to pay your taxes if you get an extension. Even if you are unable to finish your return in time, making timely payments is still an active requirement.
You must estimate the potential amount to ensure you pay your taxes on time. The IRS will either ask you to pay the difference or provide a refund if the taxes due when filing your tax return are higher than initially anticipated and paid. File an extension and pay the total amount you owe on time to avoid hefty tax penalties.
Business Tax Extension Deadline
There are some corporation tax extension request forms that you must fill out considering the U.S. Individual Income Tax Return. Here are some default deadlines to file an extension for your business taxes according to the nature of the business:
U.S. Individual Income Tax Return
April 18 (default deadline)
Submit Form 4868 or make an electronic tax payment by the return’s due date to receive an automatic 6-month extension. In this context, “automatic” refers to a process that does not need IRS approval. In exceptional cases, the IRS may actively grant a 2-month extension if they agree.
June 15 (extended deadline)
The IRS actively grants an automatic 2-month extension to U.S. citizens and residents living abroad, including Green card holders and other U.S. tax residents. This only gets approved upon meeting certain conditions and including a declaration in the tax return. After submitting Form 4868, taxpayers can automatically avail of an additional 4-month extension without requiring IRS approval.
October 16 (extended deadline; see above for clarification; it was originally April 18 or June 15)
December 15 (new deadline; previously was October 16; IRS approval is necessary)
Tax Return Deadline for U.S. Corporation Income Tax Return
April 18 (default date for businesses with a calendar year-end and an extension deadline for firms with a fiscal year-end of June 30)
For fiscal year-end taxpayers, the filing date actively falls on the 15th day of the fourth month after the end of the company’s tax year. Taxpayers can obtain an additional 6-month extension by completing Form 7004 with the IRS.
September 15 (deadline for June 30 fiscal year-end corporations)
The filing deadline for taxpayers whose fiscal year ends on June 30 is on the 15th day of the third month. After the conclusion of the taxpayer’s tax year (June 30 year-end filers are eligible for an extra 7-month extension upon completing Form 7004 with the IRS).
October 16 (extended deadline from April 18)
Penalties in Case You Failed to Pay the Tax Return
- According to the IRS, the fine for submitting a tax return after the deadline is usually 5% of the unpaid tax amount, up to 25%.
- Penalties for late payments may also apply.
Based on the number of shareholders or partners and the months the return is late, S companies and partnerships are subject to penalties.
How to File a Business Tax Extension?
To get a tax extension with ease, we are sharing some effective instructions that could assist you in filing a business tax extension:
1. Calculate the Tax you Must Pay
The extension gives you ample time to file your tax return but remember to pay the amount by the original due date. We are mentioning some due dates as a reminder:
- For partnerships and LLCs, it is March 15. If your business comes under these, you must complete Form 1065, U.S. Return of Partnership. Additionally, S corporations can fill out form 1120S, U.S. Income Tax Return for an S corporation.
- For Sole proprietorships and single-member LLCs, it is April 15. You proceed with the form Schedule C, Profit or Loss from Business, for C corporations, file form 1120, U.S. Corporation Income Tax Return.
If you pay your taxes after the original due date, IRS can legitimately charge you with penalties and interests. To counter facing such a situation, estimate what you owe. Remember to make a payment with your extension request.
2. Opt for the Correct Extension Form
Most businesses, such as partnerships, and multiple-member LLCs, S and C corporations, generally fill out Form 7004. This is an application for the automatic extension of time to file certain businesses’ income tax, information, and other returns, for the business tax extension.
Whereas sole proprietors and single-member LLCs do not file separate business tax returns and report income and losses on Schedule C. They report personal extension via form 4868, an application for an authentic extension of time to file a U.S. individual income tax return.
3. Fill out the Extension Request Form
It is easy to complete the extension form as it does not require your signature for the extension or an explanation to the IRS regarding the need for extra time.
To Complete Form 7004:
- Mention your business name, tax identification number, and business address on the form.
- In Part 1, opt for the required code form that indicates your business type and the type of tax return.
- In Part 2, If a foreign firm without a US location is requesting the extension, tick the box on line 2.
- If your firm is the parent company for a collection of businesses that submit a combined tax return, tick the box on line 3.
- If your company qualifies for an extension, actively mark the box on line 4 to extend the due date for your tax return to June 15. Companies eligible for the extended deadline include partnerships and corporations that maintain their bookkeeping and accounting outside of the US. International corporations with a physical presence in the country, and domestic corporations whose primary source of revenue is from the United States and its territories.
- Fill in the appropriate information on line 5 to specify the fiscal or calendar year you are asking for an extension.
- Enter your projected tax liability on lines 6 through 8, along with any payments you have already made or credits you intend to claim. This will lower your tax burden and the remaining amount you will pay along with your extension request.
4. Submit your Extension Request Form
A few options exist for filing the business tax extension request and paying the tax due.
Using EFTPS, you can schedule direct debits of tax payments from your business account. Interested in EFTPS? You can enroll online or call customer service. The IRS department actively validates the submission, and upon completion, they share a personal identification number (PIN) with you within 5-7 working days.
- E-File or via a Tax Professional
In this scenario, filling the form 7004 requires you to pay via electronic funds withdrawal. Provide your business bank account’s account number, and routing number and sign form 8878-A, IRS e-file Electronic Funds Withdrawal Authorization for Form 7004.
5. By the Extended Due Date, Submit your Company Tax Return
Once the IRS accepts the request for your business tax extension, this gives you six months extra to file your business tax return.
- September 15 is the Business tax extension due date for partnerships, multiple-member LLCs, and C corporations. October 15 for sole proprietors and single-member LLCs
If the Business tax extension deadline falls on a weekend or holiday, it actively gets moved to the following working day.
Remember to pay your state income taxes! Some states will accept the federal form, while others demand that company owners use their own. If you want to file your state taxes on time, you should contact your state’s Department of Revenue or a personal tax professional to determine the deadline.
Calculate Estimated Business Taxes
You can tally up your tax liabilities for the current year, including self-employment tax, individual income tax, and any additional taxes, then divide that sum by four to determine your projected taxes.
The IRS Estimated Tax Worksheet, in Form 1040-ES for individual filers and Form 1120-W for companies, can be used to compute your estimated taxes. You will receive payment vouchers and detailed instructions for performing these calculations on the spreadsheet.
Use the estimated tax calculator for your tax return.