Posted in Taxes
by Jaimy Ford on Jul 15, 2014
April 15 always strikes fear in the hearts of many small business owners. That's the IRS tax-filing deadline, and if you fail to meet it, you could face some costly penalties. However, by filing a tax extension, you can buy some extra time to review your books, collect data and receipts, evaluate whether you have included all the potential write-offs for your business. and make sure everything is correct. Those measures could maximize your tax return or reduce the amount you owe, so if you aren't quite ready for the April 15 deadline, filing a tax extension is a great business strategy.
That said, an extension will give you more time to file, but it won't give you more time to pay your taxes. When you file your extension, include with it anestimate of what you think you will owe the government to reduce any penalties and interest.
You can complete the entire process at the IRS's EFTPS website. It’s important to know that you first must register to use the website and should allow 30 days after registering to receive your login credentials by mail. Here's what you need to know to file:
- Sole Proprietors . If your business is unincorporated, you are the only owner and you pay personal income tax on profits from your business, you can receive a six-month extension, giving you until October 15 to file. Download and complete IRS Form 4868 to file.
- Limited Liability Companies (LLCs) and Partnerships. LLC business owners and companies organized as Partnerships can receive a five-month extension until September 16 this year by filing IRS Form 7004 .
- S Corporations and C Corporations . You must file your extension by March 15 using Form 7004, and you will have until September 16 to submit your final
Important Things to Know
1. You'll need your employer identification number (EIN) (unless you are a sole proprietor).
2. For sole proprietors and single-member LLCs using Form 4868, you will not need a tax-form code.
3. For Form 7004, you will need to locate the tax-form code—which is a two-digit number—for the tax-form number that your business files:
- If your business files as a Partnership, enter tax-form code “09” to designate that you file Form 1065 for your business return.
- If your business files as a “multiple-member” LLC, enter either tax-form code “09” in Part I to designate that you file Form 1065, or enter code “10” in Part II to designate that you file Form 1065-B (commonly filed by larger LLCs and Partnerships). Companies organized as a “multiple-member” LLC can also elect to be recognized as either an S Corporation or a C Corporation for federal tax purposes by filing IRS Form 8832 .
- If your business files as an S Corporation, enter code “25” in Part II to designate that you file Form 1120S for your business return.
- If your business files as a C Corporation, enter code “12” in Part II to designate that you file Form 1120 for your business return.
4. On Line 6, you will add the amount you think you owe. Use your best estimate based on preliminary financial records, accounting for income lessdeductions. If you don't include this estimate, you could wind up paying penalties and interest.
5. On Line 7, you will indicate any prepayments you have made for the tax year for which you are requesting an extension.
Bottom line: Make sure you file Form 4868 and Form 7004 by April 15 and complete and file your business return by the allowed extension date.