Tax Extensions for Businesses: What You Need To Know
There are many reasons why your business may need more time to file a tax return this year. If you are in this situation, the IRS does allow for tax extensions for businesses, but there are some important points that you will need to keep in mind to stay in good standing with the IRS.
What is an extension?
A tax extension is actually only an extension of TIME, not an extension for paying. With an extension, you are required to submit to the IRS an estimate of how much you owe (if you owe) by the deadline or you will incur interest and penalties and your extension can be revoked. You must pay your estimated taxes when you submit your extension. If you underestimate this amount or file your return late, the IRS can charge you significant penalties and interest all the way back to the original due date of the return. Your extension will generally be granted for six months.
Tax due dates are different depending on how your business is classified:
- Corporations: Return or extension due on the 15th day of the third month after the end of your business’s tax year.
- Partnership: Return or extension due on the 15th day of the fourth month after the end of your business’s tax year.
State guidelines vary from state to state, so you should consult your state tax regulations to determine if you need to file a return in your state. In some states, for example, if you do not owe taxes, your federal extension can also extend your state return as well.
The Form You Will Need to File
Your business will need to file an extension using Form 7004 (Application for Automatic Extension of Time to File). This form will need to be submitted by the due date that applies to your business.
Approval From the IRS
Generally, your business will hear back from the IRS on the status of your business extension about 24 hours after you submit it. As long as you have submitted the extension before midnight on the day it is due, it will be considered “on time.”
Many businesses (and individuals for that matter) use extensions as a means of procrastination. The true purpose of an extension is to you give you and your business additional time to collect all of the paperwork and supporting documentation to submit an accurate return. Very often a business may not have received all of the paperwork necessary to file on the original due date. The biggest mistake people make is thinking that an extension delays the date you are required to pay your taxes. This can be a costly mistake as the IRS can hit businesses that attempt this hard.
Success Tax Relief Can Help With Your Extension
If you are considering filing an extension with the IRS and would like some assistance, consider partnering with Success Tax Relief. The tax professionals at Success Tax Relief have extensive experience helping businesses prepare to submit their tax returns with or without an extension. Contact us today for a free consultation.