An IRS business tax extension is not an extension on paying your taxes, but it can buy you time to maximize your savings. Extension deadlines to file your return vary based on your business type, so it’s important to understand when and how to file to avoid penalties.
What Is an IRS Business Tax Extension?
Complying with a tax extension deadline is essential for maintaining the financial health in your business. Late filers risk facing hefty fines that could impact their bottom line.
In addition to potential penalties—for both late filing and late payment—businesses should be aware that the IRS charges interest on unpaid taxes until they are fully paid off. This means that if you don’t pay in full by the extension due date, with or without having filed your returns, your debt can snowball over time due to accumulating interest charges.
A Business Tax Extension Is Not an Extension on Payment
A tax extension gives companies extra breathing room when preparing income tax returns but does not extend the deadline for making payments towards owed taxes—something crucial to remember during this period.
The tax extension grants an automatic six-month grace period specifically meant for paperwork submission but not for payment.
Key Extension Forms and Deadlines for 2024
Your business entity, or type, will determine your regular filing date, as well as your extension deadline.
Individual Federal Income Tax Returns: Sole Proprietors and Single-Member LLCs
The tax day for individual federal income tax returns usually falls on April 15 of each year, but this date could change depending on whether it falls on a weekend or holiday. However, if these sole proprietors or single-member LLCs (Limited Liability Company) find themselves needing more time, an extension can be filed using IRS Form 4868. Filing this form automatically gives individual taxpayers until October 15 to file without the worry of a late-filing penalty.
Partnerships and S-Corporation Filing Deadlines
In contrast, the due date for partnerships and S-Corporations typically falls on March 15, unless they operate on a fiscal year basis or require additional time for filing their taxes accurately. In such cases, they may request a six-month extension via Form 7004, leaving their new due date as September 15.
C-Corporation Filing Deadlines
C-Corporations normally follow the same due dates as individual filers, so if they extend their due date using Form 7004, their new date will typically fall on October 15. Keep in mind that there are variables that cause dates to differ, such as the fiscal year of the corporation, so companies should ensure that they have all the information they need to adhere to the correct dates.
Don’t Forget to Pay Your Estimated Taxes
An IRS business tax extension does not give you an extension for your payment on tax day—and equally important, you should not forget to continue paying your estimated taxes for the new tax year. Failure to do so can incur more costs.
Estimated taxes are essentially prepayments made towards your income tax liability. Estimated taxes are based on expected annual earnings and include not only federal income tax but also self-employment tax and alternative minimum tax, if applicable, to ensure timely payment of quarterly obligations.
Navigating Quarterly Payments: A Step-by-step Guide
Making timely quarterly payments requires careful planning:
- Determine an accurate estimate of taxable income for the year, including both earnings and deductions.
- Create reminders or automate this process so that you never miss a due date, which typically falls on a business day.
- As each quarter passes, revise your quarterly payments to reflect actual business transactions over the prior quarters and adjust the future payments accordingly.
Consequences of Missing the Tax Deadline
If you owe taxes but fail to file your return or request an extension on time, your business is subject to a failure-to-file penalty. This fee typically equals five percent of any unpaid balance per month that your return is late, capped at 25 percent. If more than two months pass without action from you, expect a minimum charge of either $435 to $450 in 2024—or 100 percent of the tax due, whichever is less.
Beyond failing to file, there are repercussions if you’ve filed on time but failed to pay all amounts due. This failure-to-pay penalty, also known as the late payment penalty, can incur another blow, which usually equates to half a percent monthly until April 15. This can accrue until a quarter of the amount owed is swallowed up in these fees. If you have both failure-to-file and failure-to-pay penalties, the five percent failure-to-pay penalty would be split to allocate half of a percent to the failure-to-pay penalty.
Paying What You Can Afford: Installment Agreements & Offers In Compromise
What if paying off everything immediately isn’t feasible? There are payment arrangements available that you may qualify for, such as installment agreements. They allow taxpayers who cannot afford their entire bill some flexibility while still ensuring they fulfill their obligations. Keep in mind that even under such plans, interests continue growing, so always aim to clear debts sooner rather than later.
Offers in compromise are another tool to help settle your debt with the IRS—potentially for less than the full amount of the debt. Significant documentation is needed to prove that you qualify for the program, so seeking out professional assistance may be helpful.
Securing Relief Amid Disasters: Additional Tax Extensions
Natural disasters and combat zones can significantly disrupt your business, including tax preparation, filing and payments. The IRS often offers certain relief measures for affected taxpayers.
For those in a federally declared disaster area, there is an opportunity to secure extensions on filing returns and paying taxes. This relief is usually automatic without any formal request from the taxpayer. For up-to-date information about these provisions, visit the IRS Disaster Assistance page.
Combat Zone Provisions
In addition to natural disaster scenarios, for those serving in a combat zone or have service-connected injuries outside those areas, special rules apply as well. These include automatic extensions for filing returns, paying taxes and other benefits outlined on the IRS Combat Zones page. Remember that despite most penalty abatements, interest continues accruing on unpaid balances, so it’s crucial to take action once you’re able to do so.
Leveraging Professional Help During Difficult Times
To navigate through these challenging times more effectively, consider seeking professional advice tailored specifically for your situation. A CPA or tax attorney can provide you with valuable guidance. Technology has made accessing resources easier than ever before and many tools available online can help manage deadlines and keep track of changes related to disaster relief policies.
Digital solutions provide advanced tracking capabilities that traditional methods lack. When you submit your return, you’ll receive a confirmation from the IRS acknowledging receipt of your documents—something paper filings cannot guarantee.
Another free service of the IRS is the ability to subscribe to its calendars. It is available in both English and Spanish. This tool can integrate with Outlook or have filing and payment due dates uploaded into your calendar of choice to provide you with peace of mind as it instantly displays and allows you to track and set alerts for crucial dates like filing deadlines or extension requests.
Get Help With Your IRS Business Tax Extension
Understanding tax extension deadlines is a crucial part of managing your company’s financial health. You may not have all the documents you need to hit the original tax deadline, so filing for an IRS business tax extension is the best plan of action to keep in good standing.
If you are ready to turn tax filing from being a stress point to an advantage in your fiscal planning strategy, consider how fractional tax experts can help. Paro’s network of vetted CPAs, tax preparers and enrolled agents are available to help businesses tackle tax season effortlessly.
