Tax season can quickly sneak up on you. So, if you’re not ready to file your taxes, consider requesting a business tax extension. This is a common practice, with around 5.5 million businesses doing it annually. An extension will give you six additional months to organize your tax records and finalize your tax details. However, filing for an extension does not increase your risk of being audited, and the IRS does not require an explanation for requesting one.
To file for a business tax extension, you only need to submit a one-page form to the IRS. Although the deadline for submitting the form depends on the nature of your business and usually falls in the middle of March or April, the same day your tax return is due.
Businesses such as partnerships, multi-member LLCs, C corporations, and S corporations must submit Form 7004 by March 15. Partnerships and multi-member LLCs must submit by April 15. Sole proprietors, single-member LLCs, and individuals should use Form 4868, with a deadline of April 15. The IRS provides detailed instructions for these forms on its website, which can be helpful for first-time filers. It’s important to initiate the extension request promptly, ideally before spring.
If you choose to e-file your business tax extension, follow these steps based on the form you need:
- For Form 7004, visit the IRS website for e-filing instructions.
- For Form 4868, the IRS website also offers guidance on how to e-file for free.
Whether you choose to e-file or use traditional mail, paying an estimated amount of the taxes you owe when you file your extension is crucial.
Estimating the tax owed is essential because the extension only delays filing, not payment. To avoid IRS penalties, you must pay an estimated tax amount with your extension, ideally overestimating to prevent underpayment charges. A safe guideline is to pay 110% of last year’s tax; for example, if you owed $10,000 last year, pay $11,000 now. Overpayments can be refunded or applied to next year’s taxes.
Ultimately, business owners must complete their tax return by the extended deadline in the fall, so plan accordingly to ensure compliance and avoid last-minute stress.
