How To File a Tax Extension for Small Businesses

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Do you own and operate one of the more than 30 million small businesses in the United States?

If so, you know how important it is to keep a close eye on your bottom line. Balancing thin margins while trying to grow your customer base is a feat in itself, leaving little time or energy for little else.

That’s why, when April rolls around, you might suddenly remember there’s one little person you forgot to add to your payroll: Uncle Sam.

The good news? You have options. 

You can file a business tax extension with the IRS to get a little more time on your taxes. In most cases, this is all you need to organize your documentation and submit your required forms. 

Today, we’re taking a closer look at how this process works. Read on to discover how you can get started today.

Business Tax tax extension

Differences Among Corporation Types

Are you at the helm of a company that the IRS designates as an S Corporation or a C Corporation? If you aren’t sure, you can explore the differences to learn more.

If either of these applies to you, the IRS allows you to file for an extension until March 15 of the current tax year. Otherwise, if you’re an individual business owner (such as a sole proprietor or single-member LLC), you have until April 15. 

If the IRS approves your request, you’ll have until October 15 to complete your taxes. 

Yet, this isn’t a free pass to relax for a few months. 

Keep in mind you’ll still have to pay any income taxes and self-employment taxes that are due by April. The extension only gives you more time to prepare your income tax return. If you fail to pay your required amount by the deadline, you could face serious penalties.

To avoid these and keep your good business name, aim to pay at least 90% of the taxes due. You can use an estimated tax calculator to help you determine this number. 

Business Tax tax extension

Why File for a Business Tax Extension?

If you still have to pay the money, why go through the trouble of filing for a business tax extension? Let’s take a quick look at the benefits!

Time to Look for Savings

When you’re able to take a little longer on your return, you can go through it with a fine-tooth comb.

This way, you can spot any places where you could save money. For instance, there might be special business credits that apply to you or deductions that you can claim.

State Filing Extension

When you request an extension on your federal taxes, you can often receive one on your state return, as well. This way, you can spend more time on each. 

However, check to make sure this is the case before moving forward. While you can usually request both at the same time, there are certain circumstances under which you cannot.

Time to Find Professional Help

Do your tax forms look like they’re written in a different language? It isn’t you. Those documents are notoriously difficult to understand.

When you file for an extension, you have more time to team up with a professional tax consultant or who knows the ropes. This way, you can make sure your returns are as accurate as possible. 

The Steps to Follow 

Once you’ve decided to file for an extension, how do you proceed? Here’s the step-by-step process to know.

Step 1: Find Your Form

If you’re an individual business owner, you’ll need IRS Form 4868.

If you’re considered an S Corporation or a C Corporation, you’ll need IRS Form 7004

You can find these forms online or in paper format at your local library or post office.

Of course, you’ll only need to access these yourself if you’re attempting to handle the extension on your own. If your team with a professional tax advisor, he or she can pull these forms for you.

In addition, you can also find the forms on most major tax preparation software. On most of these programs, you’ll see a tab at the top menu for filing an extension.

If you’re filing Form 4868, you’ll likely use the personal or home business version of the software. On the other hand, someone filing Form 7004 will usually require the business version upgrade.

Step 2: Submit Your Payment

Once you have the forms in front of you, you can complete them and submit them to the IRS along with your required payment. Note that this process only applies if you plan to pay your taxes via the traditional, paper-based method.

According to the IRS, you can receive an automatic extension on your return when you pay your taxes electronically. This includes paying through:

  • IRS Direct Pay
  • Electronic Federal Tax Payment System
  • Debit or credit card
  • IRS2Go mobile app

If you pay with any of the above tools, you don’t have to file a paper or electronic Form 4868. Instead, you’ll just select Form 4868 as your payment type and payment date. This will automatically trigger an extension request.

Make sure to keep your online confirmation as evidence of your payment!

Whichever method you decide, remember that tax rules and forms can change on a regular basis. For the most accurate advice, always check with the IRS or a tax professional, like the ones on our team.

Business Tax tax extension

Navigating Your Taxes as a Small Business Owner

Running a successful small business is one of the most challenging endeavors, especially in a marketplace flooded with competition. However, the burden of tax time shouldn’t add to your stress.

Whether you’re filing a business tax extension, trying to figure out payroll, or simply calculating your home office deductions, the process can be complicated.

That’s where we come in.

We’re a team of qualified tax attorneys dedicated to making sure you know your rights and next steps as a U.S. taxpayer. From pre-filing consultations to tax-related litigation and defense, we do it all.

Contact us today and let us take care of the legal legwork for you.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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