Did you know that both individuals and businesses are allowed to ask for a tax extension?
Taxes shouldn't hold entrepreneurs back from growing their business. If you need more time to file your business taxes, here are details to consider.
You Still Have to Pay
To avoid state and IRS fines and penalties, you need to estimate the amount and pay taxes by the due date.
The IRS rule is that you must pay at least 90% of income taxes along with self-employment taxes during the year.
For a way to get a general idea of what taxes are due, review this article from The Balance Small Business: How Do I Calculate Estimated Taxes for My Business?
Here’s what to consider when deciding whether or not to file an extension:
- You’ll have more time to prepare and explore deductions or credits.
- You’ll have an easier time finding a CPA or other tax professional after the deadline
- Unfiled taxes can slow down the process when applying for a low-cost SBA loan or other types of business loans. Before you start the loan application process, try to meet your tax obligations.
- You’ll have more time to procrastinate if you’ve been simply putting off doing your taxes. To avoid additional stress, pay on time and get it out of the way.
Federal Tax Extensions Applications
If you need to file a business tax or personal tax extension, there are two forms available.
- Form 4868 - For U.S. Individual Income Tax Return: A U.S. citizen or resident files this tax form to request an automatic extension of time to file a U.S. individual income tax return. Download a pdf copy of Form 4868 here.
- Form 7004 - For Corporate and Partnership Taxes: This form is an application for automatic extension to file certain business income tax, information and other returns. The Form 7004 does not extend the time for payment of tax. Generally, Form 7004 must be filed on or before the due date of the applicable tax return. Download a pdf of form 7004 here. Form 7004 can also be e-filed through the Modernized e-File (MeF) platform. For more information on filing electronically, visit the IRS website here.
State Tax Extensions
State guidelines for filing extensions are varied. In some cases, unless you owe state taxes, your federal automatic extension can also extend your state returns as well. Refer to the tax form instructions or tax help for your state before you request a state extension.
Note that each state decides which tax payment option is offered businesses. Some require businesses with larger tax liability to make electronic payments, some jurisdictions do not support electronic payments.
Finally, it’s time to get your calendar out. The inDinero blog has a comprehensive list of the dates businesses need to know regarding tax filings: When are 2018 Tax Returns Due? Every Date You Need to File Business Taxes in 2019
Here are some good resources as you make your tax plan for the year. Be sure to work with a tax professional if you need guidance or have questions.
- The Big List of Small Business Tax Deductions (and How to Claim Them)
- Hiring a Tax Specialist for Small Business
Information contained in this article is for educational purposes and not intended to be tax advice. Be sure to work with a tax professional if you need guidance or have questions.