As the tax filing deadline for returns draws near, there’s really no reason to panic. You can easily obtain more time to file.
For the record, this year’s deadlines are March 16 for calendar year corporations. That includes C- and S- corporations. The deadline to file is April 15 for all other companies.
But again, if you’re hearing the clock ticking in your head and don’t think you can beat it, there are ways to get some more time. Here are some pointers on filing tax extensions for business.
Make a Timely Request
A filing extension is automatic. You get it simply by asking the IRS for it. The only catch is that you must file the request for an extension by the deadline you’re expected to meet for filing your return. Businesses that make a filing request have until Sept. 15, 2015 (Oct. 15, 2015 for Schedule C filers) to submit this year’s returns.
If you fail to file the return on time and don’t ask for an extension, the penalties can be hefty. For example, for partnerships and S corporations that do not even pay any federal income tax, the penalty is $195 per month (or part of the month) per owner for the length of the tardiness.
So, if you’re an S corporation with three owners and delay filing for two months without having asked for an extension, the penalty is $1,170. This penalty could be even higher because the Tax Increase Prevention Act of 2014 gave the IRS authority to increase it for inflation for returns due after 2014; no increase has yet been announced.
Different penalties apply to Schedule C filers and C corporations.
Use the Correct Form
Your business’s entity type dictates the form to use in making your return. Here is a rundown for your entity type:
- Sole proprietors and one-member limited liability companies treated as disregarded entities: Form 4868.
- Partnerships: Form 7004 (code 09)
- Limited Liability companies (LLCs): Form 7004 (code 09)
- S corporations: Form 7004 (code 25)
- C corporations: Form 7004 (code 12)
No Questions Asked
You can request a filing extension for any reason.
If Spring is your busy season, which prevents you from getting your records in order, or your tax preparer is excessively busy, obtain an extension.
There has been no statistical evidence that obtaining a filing extension increases your chances of being audited.
More Time for Action
If you are a pass-through entity (a partnership, LLC, or S corporation), the filing extension applies not only to the tax return, it also applies to Schedule K-1 that you must furnish to owners. The failure to give K-1s to owners in a timely manner is subject to a penalty of $100 per K-1. Late filing fees are also tacked on to your penalty bill from the IRS.
If you obtain a filing extension, you have until the extended due date to fund a qualified retirement plan that was set up by the end of 2014.
If you did not sign any paperwork by the end of the year, you can still set up and fund an SEP plan for 2014 by the extended due date of the 2014 return. The SEP plan can be used by a corporation or any unincorporated business. However, owners must cover employees in most cases, so factor in the after-tax cost of making contributions.
An Extension Doesn’t Give More Time for Payment
Getting a filing extension does not give you more time to pay what you owe.
If you send your filing request by mail, you can include payment for what you think you’ll owe to minimize or avoid any late payment penalties.
If you submit your request electronically, still make a payment for anticipated tax liability. This can be done via check or credit/debit card, or via a government payment option like Direct Pay! or through EFTPS.gov.
Remember, if that clock’s ticking and you’re nowhere near finished with your tax return this year, panicking isn’t necessary. Simply file for an extension by your normal tax deadline, and remit any payment you expect to pay in taxes. Then relax and finish your taxes. And, of course, when in doubt, talk to a tax professional.
Stress Photo via Shutterstock
This can be confusing if you don’t have a guide or an accountant that can help you. Trying to learn it on your own can be quite a hassle too. But I guess you have no choice but learn it.
As of April of this year I anticipated my start up would be operating before September. So I filed a 7004 Code 09 to be safe. However, during the time of the extension it became clear that we still would not be operational. Since we have yet to conduct business, do we still need to file. Do filing a 7004 ultimately hurt us?
I filed my estimated payments for 2015 on Feb. 4, 2016 thinking they were being applied to my 2015 taxes. Now instead of overpaying – I owe money, which I don’t have. How can I fix this? You help is so appreciated.
I need to file an additional extension due to family illness, what is the form?
Individuals (other than those out of the country) and businesses get one extension to file their tax returns. Once the extension has passed, late filing penalties accrue. No additional extensions are granted so taxpayers should file as soon as they can to minimize penalties. NOTE: SOME FILING DEADLINES AND EXTENSION DEADLINES HAVE CHANGED FOR 2016 RETURNS FILED IN 2017.
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