The Simple Guide To Small Business Tax Extensions

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The Simple Guide To Small Business Tax Extensions


Guide To Small Business Tax Extensions

Worried you won’t be ready to file on time? The bookkeeping experts at Bench will walk you through applying for a filing extension.

If the tax deadline is looming but you haven’t even started to get organized, don’t worry. If you act fast, you can file for an extension, and give yourself more time.

It begs saying: An extension to file your taxes isn’t an extension to pay them. Even if you file with an extension, you’re required to pay your estimated taxes by the original due date. Otherwise, you’ll have to pay a late filing penalty.

First up, a guide to filing a federal tax extension. Then, everything you need to know to file your state tax extension.

How to file a federal tax extension, generally speaking

1: Download the IRS tax forms that match your business type (or business entity)

2: Submit a federal tax extension request to the IRS

3: Pay your taxes on time

Not bad, right?

This process applies no matter your business type. The only major variable is which forms you need to file; that depends on your business entity type.

Sole proprietors: How to file for a federal tax extension online

Filing an extension for your sole proprietorship is pretty much the same as filing for a personal tax extension.

But before you do anything, check this list—you may not need to file an extension at all.

The following get an automatic six month tax extension:

  • Individuals (and their spouses) working in combat zones, supporting the U.S. Armed Forces
  • Members of the military serving outside the U.S.
  • U.S. citizens living and working abroad
  • U.S. citizens living in parts of the country affected by major natural disasters

If any of the above apply, you don’t need to file an extension; you get one automatically.

Otherwise, you’ll need to apply for an automatic extension. There are methods you can follow.

Method #1: Pay electronically (fastest)

If you’re paying your taxes online, you can quickly apply for an extension in the IRS payment portal. Just select the “extension” option, and you’re done.

Filing online and using direct deposit to pay is also the fastest way to take care of your taxes. You’ll need to provide your contact and bank information to the IRS, but after that, filing for an extension is easy.

Method #2: File online (slower)

To file for an extension separately from paying your taxes online, you need to fill out and submit IRS Form 4868

If your income is below $72,000, you can file this form online using Free File software, but if your income is above $72,000 you must use Free File fillable forms.

Remember—you still need to pay your taxes by April 15, even if you’re filing for an extension. To figure out your tax liability, we recommend the Bench guide to calculating small business taxes.

Tax extension deadline

Your deadline to apply for a tax extension is the same as your original filing date: April 15. 

Once you’re approved for an extension, your tax filing deadline moves to October 15.

Partnerships, S corps, and C corps: How to file for an extension online

This process takes less than half an hour, provided you have all your information on hand.

You’ll need to fill out and submit IRS Form 7004. The fastest way to do this is by signing up for the IRS’ e-file service.

If you’re filing extensions for multiple businesses, you’ll need to file separate Form 7004s.

Once you’ve identified which company you’re filing an extension for, you’ll need to enter the following information through the IRS e-file service:

  • Whether your company is a foreign corporation that doesn’t have an office or place of business in the U.S.
  • If your company is a corporation, and is the common parent of a group that will be filing a consolidated return.
  • Whether the company is a corporation or partnership that qualifies under Regulations section 1.6081-5.
  • The dates of your calendar and tax years.
  • Whether you’re filing a short tax year, and why.

Finally, you must include your estimated total tax bill for the year, along with your total payments and credits. 

Tax extension deadline

As with sole proprietors, your deadline to file for a tax extension is the same as your tax filing deadline:

Partnerships tax deadline: March 15; With extension: September 15

S corporations tax deadline: March 15; With extension: September 15

C corporations tax deadline: July 15; With extension: October 15

For C corporations: If your fiscal year end is different from the calendar year end, then your filing due date is on the 15th day of the 4th month after the fiscal year ends. Your extended deadline is six months after this date.

How to file a state tax extension for your business

Filing a state tax extension differs from filing a federal tax extension for your business because each state has different rules. 

So, what exactly you need to do to file a state tax extension depends on which state you’re doing business in. But regardless of location, you need to follow the following five steps to file your state tax extension.

Step 1: Determine where you need to file

There are 45 states that charge income tax. 

The ones that don’t: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. 

New Hampshire and Tennessee don’t require businesses to file income tax, but do collect tax on dividends and investment income.

Every state that charges state taxes has a tax nexus. When you do business within that nexus, you have to file taxes there. 

“Doing business” does not include:

  • Soliciting, directly or indirectly, sales of personal property there
  • Providing services ancillary to the sale of property
  • Keeping property to assist in sales within the state
  • Accepting and fulfilling orders for delivery there, so long as the orders are processed outside of the state

“Doing business” does include:

  • Selling services (but not personal property)
  • Providing services to customers or clients
  • Accepting orders
  • Repossessing property
  • Holding inventory

State tax nexus can be tricky; be sure to get help from an accountant if you’re unsure.

Step 2: Figure out state tax authority requirements

Every state is different. Visit your state tax authority’s website and find:

  • Their state tax extension form
  • The state income tax extension filing deadline
  • Instructions on filing a state tax extension with your state tax authority

Some states will grant automatic extensions; others require you to file paperwork.

Step 3: File your tax extension by the deadline

Tax deadlines vary state by state.

Below, you’ll find the website for each state tax authority. Check out your state’s website to find the state tax filing deadline, and confirm that the tax extension deadline is the same date.

Alabama | Alaska | Arizona | Arkansas | California | Colorado | Connecticut | Delaware | District of Columbia | Florida | Georgia | Hawaii | Idaho | Illinois | Indiana | Iowa | Kansas | Kentucky | Louisiana | Maine | Maryland | Massachusetts | Michigan | Minnesota | Mississippi | Missouri | Montana | Nebraska | Nevada | New Hampshire | New Jersey | New Mexico | New York | North Carolina | North Dakota | Ohio | Oklahoma | Oregon | Pennsylvania | Rhode Island | South Carolina | South Dakota | Tennessee | Texas | Utah | Vermont | Virginia | Washington | West Virginia | Wisconsin | Wyoming

Step 4: Pay your state taxes on time

As with federal tax extensions, regardless of when you file your state taxes, you need to pay them on time.

That means estimating your tax owing. If you’re uncertain of this number, your accountant should be able to provide guidance.

If you pay more than necessary in taxes, you’ll get your money back in the form of a refund or a tax credit. But if you underpay, you may be charged penalties. That’s why it’s important to get the help of an accountant.

Step 5: File your state taxes before the extended deadline

The length of your tax extension may vary according to what state you’re filing in. Be sure to mark it on your calendar, and file on time.

If you’ve already filed for a small business tax extension, and miss it, your state tax authority isn’t likely to offer much leeway. So don’t miss it!

Being forced to file for a tax extension isn’t the worst case scenario. But it isn’t the best, either. Tax season is easier—and over faster—when you get organized and file on time. The most surefire approach is to get help from professionals.

If you use Bench, BenchTax connects seamlessly with your bookkeeping services, to get your business taxes filed accurately and on time, every time. There’s no danger of missing out on tax deductions because you rush to file before the deadline. And you never need to file for an extension.

If you don’t use Bench, give it a try. They’ll do one month of bookkeeping for your business free, so you can see how smoothly Bench takes care of your day-to-day bookkeeping—and, if you like, your end-of-year taxes.

Sign up for BenchTax here

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