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How to File a Business Tax Extension with the IRS

28 Mar

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Filing taxes can be overwhelming and stressful for small business owners, especially when they have other pressing responsibilities. Luckily, filing for a business tax extension is a legal option that allows for some breathing room.

For small and mid-sized business owners in the US, filing for a tax extension can provide more time to get their finances organized, collect necessary documents, and ensure everything is in order.

It is important to note, however, that a tax extension does not extend the payment due date. Businesses must still pay any taxes owed by the original due date or risk incurring penalties and interest.

In the following sections, we will walk you through the necessary steps to file for a business tax extension. We will cover due dates, eligibility requirements, filling out the required forms, and paying any estimated taxes.

With our guidance, you can successfully file for an extension and avoid any unnecessary fees or penalties.

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Business Tax Deadline 2023

When it comes to filing taxes for your business in the US, the deadline depends on the type of business entity you have.

“Business entity” simply refers to the legal structure of your business, which can take on different forms such as sole proprietorships, partnerships, limited liability companies (LLCs), S corporations, and C corporations.

Tax Due Date for C-Corporations

Each of these business entities has its own tax requirements and deadlines that you need to keep in mind. For instance, C-corporations usually have a tax return deadline of the 15th day of the 4th month following the end of the tax year, which is on April 18th this year.

However, corporations with a fiscal year end other than December 31st may have a different deadline, falling on the 15th day of the 4th month following the end of their fiscal year.

Tax Due Date for Partnerships, LLCs and S-Corporations

Partnerships and LLCs, on the other hand, have a different deadline for filing tax returns, which is on the 15th day of the 3rd month following the end of their tax year. For example, the deadline for partnerships to file their tax returns was March 15th this year.

Penalties For Filing Late

You may be wondering how much you will have to pay in penalties or interest if you fail to file your taxes or your extension on time. 

  • Penalty for late filing: 5% of the unpaid tax for each month the return is late.
  • Late payment penalty: 0.05% of the unpaid tax amount for each month it is unpaid.

If a business fails to file and pay taxes on time, the maximum penalty applied in the same month is 5%, which includes a 0.5% failure-to-pay penalty and a 4.5% failure-to-file penalty.

Once the five-month period for filing taxes has elapsed and the failure-to-file penalty has reached its maximum, the failure-to-pay penalty will still continue at a rate of 0.5% per month, either until the business pays the taxes or until it reaches a maximum of 25% after 45 months.

A Step-by-Step Guide on How To File a Tax Extension for Your Business

Don’t know where to start? Don’t worry! Join us as we guide you through the essential steps you need to take to file for a business tax extension successfully. 

The steps include:

  1. Determining if your business is eligible
  2. Filling out the necessary forms
  3. Paying any estimated taxes
  4. Submitting the forms to the IRS

We’ll explain each step in detail and provide helpful tips to ensure that you complete the process accurately and on time. 

#1 Determine if Your Business Is Eligible

To be eligible for a tax extension, businesses must meet certain criteria. In general, any business can apply for a tax extension as long as they file the appropriate form by the original due date of their tax return. For example, corporations can file Form 7004, while partnerships can file Form 1065.

It’s important to note that filing for an extension does not extend the payment due date for any taxes owed. Businesses must still pay any estimated taxes by the original due date to avoid penalties and interest. Additionally, businesses that have already filed for an extension in previous years may not be eligible for another extension.

Consulting a tax professional can help you determine your eligibility and ensure that you follow all necessary steps to file for a tax extension accurately and on time.

#2 Fill Out Tax Extension Forms

The next step in filing a tax extension for your business is to fill out the necessary forms. As mentioned earlier, the forms you need to fill out depend on your business entity.

The next step to file for a business tax extension is filling out the required forms. The forms you need to complete vary depending on the type of business entity you have.

  • C-Corporations: fill out Form 7004, which is also known as the “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.” You can file this form either electronically or by mail. Note that the form needs to be submitted by the original due date of the tax return, which is usually April 18th.
  • Partnerships and LLCs: the form you need to complete is Form 1065, also referred to as the “U.S. Return of Partnership Income.” This form can also be filed either electronically or by mail and should be submitted by the original due date of the tax return, which was March 15th.

Just like when you fill out your individual W-2 form, it’s essential to ensure that all the information you provide on the business tax extension forms is accurate, and all entries are double-checked to avoid errors or delays in processing. Make sure you include any estimated taxes owed with the form to avoid penalties and interest.

#3 Pay Estimated Taxes

If you’ve filed for a tax extension, it’s crucial to settle any estimated taxes due by the initial deadline to prevent facing penalties and interest. 

To calculate the sum of estimated taxes owed, companies can rely on the details from their prior year’s tax return and make adjustments for any changes in income or deductions.

Payment of taxes can be conducted electronically via the IRS’s Electronic Federal Tax Payment System (EFTPS), or by mailing a check or money order alongside Form 7004 or Form 1065. 

Keep in mind that any estimated tax payments submitted after the original due date may still incur penalties and interest.

#4 Submit The Forms to the IRS

To conclude the process of obtaining a tax extension for your business, you need to submit the required paperwork to the IRS.

If you choose to file electronically, the IRS will issue a confirmation once your extension has been successfully received. If you prefer to mail your forms, it’s advisable to send them via certified mail to guarantee their receipt by the IRS.

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We’re Here To Help!

Dealing with taxes can be overwhelming, and even with an extension, it can still be a source of stress. But you don’t have to handle it all by yourself. VensureHR, a leading professional employer organization (PEO), is here to provide the assistance you need to navigate the complexities of taxes and other HR-related matters for your business.

As a PEO, VensureHR can assist small and mid-sized businesses with a wide range of HR functions, including payroll, benefits, recruiting, and compliance. During this time of year, we specialize in offering expert tax-related services. To address any questions or concerns you may have, you can schedule a consultation with one of VensureHR’s representatives.

As a small business owner, you likely have more pressing matters to attend to than back-office HR tasks. By partnering with VensureHR, you can alleviate your workload and leave your tax-related worries to them. Contact VensureHR today to kickstart the process.

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