We get it. Time flies. And if time has gotten away from you when it comes to filing your taxes, not to worry; you can request a business tax extension. While filing a business tax extension might seem faux pas, it’s actually relatively common. In fact, out of approximately 140 million U.S. tax filers, there are about 10 million businesses (and 5 million individuals) who file tax extensions annually.
If spring is your busy season, file for a business tax extension. If you had an emergency earlier this winter, file for a business tax extension. If you simply haven’t gotten your records together, file for a business tax extension. This will give you 6 more months to get your taxes squared away.
Some people express concerns that filing for a business tax extension can lead to an audit, but there has been no evidence that supports a correlation between extensions and audits. And because the IRS doesn’t ask you to provide a reason for your extension, there’s nothing to worry about.
However, even though you’re considering a business tax extension, there are still a few things you need to know:
How to file a small business tax extension.
To file a business tax extension, all you need is a one-page form to submit to the IRS. The form is due the day that your tax return would be filed, so either mid-March or mid-April, depending on your business type.
Understand what forms you need.
Here’s the breakdown:
- Partnerships, multi-member LLCs, C corporations, & S corporations file Form 7004.
- Form 7004 is due for C corps and S corps on March 15, 2023, and April 18, 2023 for partnerships and multi-member LLCs.
- Sole proprietors, single-member LLCs, and individuals file Form 4868.
- Form 4868 is due for all filers on April 18, 2023.
You also need to make your request in a timely manner, which means well before the spring.
Where to file business tax extension forms.
You can either e-file or mail in your business tax extension form.
How to e-file business tax extensions:
- If you’re filing Form 7004 and you’d like to e-file, follow these directions on the IRS website.
- If you’re filing Form 4868 and you’d like to e-file, read about how to file for free on the IRS website.
Whether you’re sending your extension form via snail mail or e-filing, you still need to pay an estimate of the taxes you owe.
Estimate what you owe…and pay that.
The hardest part of the process is estimating how much tax you owe. Remember, a tax extension doesn’t give more time for payment.
Whether you’re sending your extension form via snail mail or e-filing, you still need to pay an estimate of the taxes you owe. And keep in mind that if you don’t send payment, the IRS could deny your extension.
Be as accurate as possible…and err on the side of overpayment.
The IRS can issue costly interest charges if you underestimate the amount of taxes you owe. And, if you don’t make a good estimate, or are far off from the actual total, you could be subject to a penalty charge.
To avoid penalties, a safe bet is to go ahead and pay 110% of what you paid last year when you file your tax extension. So, if you owed $10,000 last year, make sure you pay $11,000 in your estimate. (If you don’t typically owe money when you file taxes, no need to pay anything with your extension.)
And don’t worry about overpaying! If you file and end up owing less money than the previous year, you can get refunded for the extra amount paid, or apply that excess money to filing next year’s taxes.
Business tax extension deadlines are essential.
Tax extensions are due by your original tax deadline, whether that’s in March or April. After that, you have six months from the tax deadline to finish filing your taxes — so September or October, depending.
Wondering which business tax extension deadline you qualify for?
- March 15, 2023: Deadline for C corps and S corps filing a tax extension.
- April 18, 2023: Deadline for partnerships, single and multi-member LLCs, sole proprietors, and individuals filing a tax extension.
For more business tax deadlines, check out our recent blog: 2023 Business Tax Filing Deadlines: What You Need To Know This Tax Filing Season.
Complete an official return in the fall.
While you can file for a tax extension, you’re going to have to face your taxes eventually. Keep your new deadline in mind as you prepare for the fall. If that means avoiding business trips, skipping workshops, or sending a representative in your place to get those taxes done, that’s just what you might need to do.
For the time being, though, you can rest easy once your extension is accepted and use your newly found time wisely.
Business Tax Extension FAQs
What are the benefits of filing a business tax extension?
Whether spring is your busy season or you just haven’t had the time to get your tax records together, file for an extension. It’s very common to do — about 10 million businesses and 5 million individuals file tax extensions annually.
How much does it cost to file a tax extension?
It’s free! The only money you need to account for is your tax estimate.
Is there a penalty for filing a tax extension?
No, there is not! Remember, though – your tax payment deadlines don’t change. As long as you pay your tax estimate when you file your tax extension, there should be no penalty charges.
How do I extend my tax deadline? What is the tax extension date? How long is the tax extension? When is the last day to file a business tax return after filing an extension?
Generally, Form 7004 and Form 4868 must be filed on or before the due date of the applicable tax return, whether that’s March 15 or April 15. The due dates of the returns can be found in the instructions for the applicable return.
After that, you have six months from the tax extension deadline to finish filing your taxes — so September or October, depending.
What is the business tax extension form? And what is a Form 7004?
The IRS website has extensive directions for both forms which is helpful, especially if this is your first time filing an extension. You also need to make your request in a timely manner, which means well before April 15! Start now.
Where does form 7004 get mailed? Can you file a tax extension online? Can you file a form 7004 online?
Form 7004 can be filed electronically for most returns. More details on electronic filing can be found above.
You can also mail Form 7004. The mailing address depends on the type of form and where your business is located.
How do I know if my tax extension was accepted?
You should receive a notification. Also, you can always call the IRS customer service number to check on your tax extension status.
What happens if I miss the tax extension deadline? What happens if you file for a tax extension late?
If you’re late on filing an extension, you’ll need to hop on filing your taxes as you will no longer be able to extend your deadline to 6 months later. The sooner you file, the better.
If you miss the tax extension deadline, that also means that you missed the general tax deadline. You’ll be charged a failure to file and potentially a failure to pay penalty from the IRS, but if you remedy them, you and your business will be OK.
What happens if I don’t file taxes?
Most of the people who don’t owe tax ask, why should I file? While that’s a larger question outside of business tax extensions, the bigger problem here is that you could miss out on a tax refund or tax credit.
The biggest tax credit that Acuity has found for the entrepreneurs we work with is the Research and Development Tax Credit. While you file it with your federal tax return, if you pay payroll taxes, this can offset them going forward. In addition, many states offer R&D tax credits, so don’t forget to check for potential credits there, too!
Tax services at your fingertips with Acuity’s help.
If you have business tax extension questions, if you think your business might benefit from a tax extension, or if you think a business tax extension is inevitable at this point, learn more about how one of our tax CPAs can help. You can also hop over to our tax services page to check out what we offer. We’re here to help!
And P.S. – Keep this small business tax prep checklist handy to ensure that you stay ahead of the game!