With so many other responsibilities and concerns, busy business owners often find it difficult to complete their tax returns on time. Fortunately, if you own a small business, you may be able to qualify for a tax deadline extension. When used properly, this extension will allow you to submit your tax return on a later date without incurring any penalties or interest for late filing from the IRS.
Understanding Tax Return Deadlines
Your business's tax return filing deadline will depend on the type of business you operate. For the 2015 tax year, S corporations must file their tax returns by March 15th. Partnerships must file their tax returns by the 15th day of the 4th month after the end of their tax year (April 15th for calendar year taxpayers), and C corporations must file their tax returns by the 15th day of the 3rd month after the end of their tax year (March 15th for calendar year taxpayers).
If you plan to request an extension, the request must be submitted before your designated filing deadline in order to be valid. If you don't request an extension and you file after the deadline, you will owe a penalty. For S corporations and partnerships, the penalty is equal to $195 per month, per partner or shareholder. Even filers who owe no tax are subject to a late file penalty, so don't assume that you don't need to request an extension if you plan to miss the deadline.
Filing for an Extension
To request an extension, most businesses can complete and submit Form 7004: Application for Automatic Extension of Time to File. In general, the deadline for filing your tax return will be extended to September 15th if your request is approved. However, if your business does not operate on the calendar year, your new due date may be different.
Please note that an extension only affects your deadline for filing your tax return, not paying what you owe. When you request your extension, you must also pay at least 90 percent of your tax liability for the year. If you underestimate your tax liability, the IRS may not allow your extension. Likewise, if you don’t pay your tax liability when you request your extension, the IRS may impose penalties and interest, which will significantly increase the amount you owe.
Keep in mind that the IRS is no longer sending notifications to taxpayers whose requests for deadline extension are approved. You will hear from the IRS only if your request is denied.
Personal Filing Extensions
As with business filing extensions, a personal filing extension allows you to extend your deadline for filing your tax return, but not paying. To request an extension, simply file Form 4868. Remember to pay at least 90 percent of the tax you will owe by the standard deadline to avoid paying penalties.
Keep in mind that, if you purchase health insurance through the federal exchange, requesting an extension may cause problems when it comes time to renew your health insurance. This process typically begins prior to the October 15th deadline, so file your tax return for the previous year as soon as possible.
About State Extensions
If you need a federal extension, you may need an extension on the deadline for your state income taxes as well. In many cases, your federal extension request can be used to extend the deadline for your state taxes as well. However, this may not be possible if you owe state taxes or if your state's laws differ.
Getting Professional Help
PADGETT BUSINESS SERVICES® understands all of the rules that apply to small business owners requesting tax deadline extensions. If you need to request an extension and you want to make sure that you don't owe any additional interest or penalties because of the request, please contact us for assistance.
Even if you have already missed the March 15 deadline, we may still be able to help waive the associated penalties or lessen the damage. PADGETT BUSINESS SERVICES® can also help you avoid extensions in subsequent years by ensuring that your tax returns are always prepared and submitted on time.