How to File a Business Tax Extension (Federal)

Written by Connor DeHaan    |    Published: March 21, 2024

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How to File a Business Tax Extension

If you won’t be ready to file your business taxes on time this year, learn how to file a business tax extension. With a tax extension in hand, you’ll still need to pay your taxes (the money you owe to the IRS) by your business’s usual tax deadline . But you’ll have more time to prepare your books, identify deductions, and file your tax return (the paperwork).

Best of all: it’s free to file for a tax extension, and the process can be performed online.

Key Takeaways

  • A business tax extension allows additional time to file income tax returns but does not delay tax payments. The due dates for Form 7004 or Form 4868 vary by business type.

  • It’s free to file for a business tax extension and, once the application form is submitted, a six-month extension of time to file is automatically granted.

  • Tax extensions provide businesses time to gather documents, handle complex transactions, and consider tax strategies, but do not extend the payment deadline, potentially leading to penalties if estimated taxes are not paid.

  • E-filing and automated tax estimation tools can simplify filing a tax extension. At the same time, businesses like Hiline offer comprehensive tech-enabled accounting services to assist with strategic tax planning throughout the year.

Business Tax Extensions: An Overview

Filing a tax extension (federal) is a surprisingly simple process:

  1. Estimate the taxes you owe
  2. Choose the right tax extension form
  3. Complete the tax extension form
  4. Submit your tax extension & pay your taxes owing

Once that’s done, your 6-month extension of time to file is automatically granted.

All business types—except for sole proprietors—follow the same steps to apply for a federal tax extension. We’ll walk you through each step in detail below. 

You can also apply for a state tax extension to get more time to file your state tax return, but the forms and steps to do so differ from state to state. Check the Secretary of State to learn more.

Tax Extension Forms and Deadlines

Use this table to learn which tax extension application form and filing deadlines apply to your business type. These dates apply for businesses filing their 2023 tax returns.

  Tax Filing Deadline* Tax Filing Deadline with 6-Month Extension Tax Extension Application Form
Sole Proprietors April 15, 2024 October 15, 2024 Form 4868 or via the IRS Payment Portal
Partnerships March 15, 2024 September 14, 2024 Form 7004
S Corporations March 15, 2024 September 14, 2024 Form 7004
C Corporations* April 15, 2024 October 15, 2024 Form 7004

 

* This is your business’s usual tax filing deadline. If you want a tax extension this year, you will need to file for the tax extension and pay your taxes owing on or before this date.

** Note: If a C Corporation’s fiscal year end is not calendar year end, then the corporation’s filing due date is on the 15th day of the 4th month after the fiscal year end. In this situation, the extended deadline would be 6 months after this date.

How to File a Business Tax Extension: Step-By-Step Instructions

The following tax extension instructions apply to businesses using Form 7004 to apply for a tax extension—S Corporations, C Corporations, Partnerships and Multi-Member LLCs. The process is slightly different for Sole Proprietors and Single-Member LLCs, so we’ve included a separate section on that below.

1. Estimate the Taxes You Owe

We can’t stress this enough: a tax extension does not give you more time to pay your taxes (the money you owe the IRS). It gives you more time to file your business tax return (the paperwork).

If your business owes money to the IRS this year, you’ll need to pay that money by your business’s original tax return deadline:

  • March 15, 2024: S corporations, Partnerships, and Limited Liability Companies (LLCs) filing as a Partnership.

  • April 15, 2024: C corporations, Sole Proprietorships, and Single-Member LLCs.

If you don’t pay your taxes owing by the applicable deadline, the IRS may charge interest and penalties.

2. Choose the Right Tax Extension Form

Download the tax extension form that corresponds with your business type.

  • Form 7004: Partnerships, Multi-Member LLCs, S Corporations, and C Corporations

  • Form 4868: Sole Proprietors and Single-Member LLCs. (if that’s you, see separate instructions further below)

3. Complete the Tax Extension Request Form

Completing Form 7004 is easy. First, enter your business details: business name, tax identification number, address.

In Part I, select the form code that applies to the type of tax return your business files (e.g. C Corps — Form 1120, Partnerships — Form 1065, etc.)

In Part II, provide some basic information about your company. Use the checkboxes to indicate:

  • Line 2: If your organization is a foreign corporation that doesn’t have an office or place of business in the U.S.

  • Line 3: If your organization is a corporation, and is the common parent of a group that will be filing a consolidated return.

  • Line 4: If the organization is a corporation or partnership that qualifies under Regulations section 1.6081-5.

  • Line 5a: The dates of your calendar and tax years.

  • Line 5b: If you’re filing a short tax year, and why.

  • Lines 6, 7, 8: Include your estimated tax liability, any payments you’ve made to date or credits you intend to take that will reduce your tax liability, and the balance due that you’ll pay with your extension request.

4. Submit Your Tax Extension Form and Pay Taxes Owing

Businesses have a few options to submit a tax extension request form and pay taxes owing. The quickest and easiest method is to handle everything via the IRS E-File service. Once you’ve created an E-File account, the website will guide you through the filing and payment process.

You can also fill out a paper Form 7004 and mail it to the IRS with a check.

Tax Extensions for Sole Proprietors and Single-Member LLCs

Sole proprietors and single-member LLCs don’t file separate business tax returns. Instead, they report business income or losses on Schedule C. Because of this, these business types have two options to file for a tax return. Both options are different to the process all other business types go through (outlined above).

1. IRS Payment Portal (quickest method)

You can get an automatic six-month extension without filling out any other forms—if you pay your taxes online. Just select the “extension” option when you pay your taxes via the IRS payment portal. Your six month extension will be granted automatically.

2. File Form 4868

If you wish to file for a tax extension separate from paying your taxes online, you’ll need to use Form 4868 to get an automatic six-month extension of time to file. You can use Free File software to file Form 4868 online if your income was below $79,000 in 2023. If your income was above the $79,000 threshold, you’ll need to use the Free File fillable forms to get the job done. 

You can also complete a paper version of Form 4868 and mail it to the IRS.

Business Tax Extensions: What are the Pros and Cons?

As with most things in life, applying for a business tax extension has advantages and disadvantages. On one hand, it can relieve the stress of tax season, allowing you more time to gather information and avoid penalties. On the other hand, it doesn’t exempt you from accruing interest on any unpaid taxes. It’s essential to weigh these factors before deciding to file an extension.

Pros: More Time to Gather Information and Avoid Penalties

The most significant benefit of filing a tax extension is the additional time it offers to get your ducks in a row. This is especially beneficial for businesses facing significant changes, such as mergers or acquisitions, or those experiencing delays receiving essential tax documents.

Moreover, the extra time can result in potential savings on tax preparation fees during off-peak seasons. And, of course, it can save you from the hefty failure-to-file penalties!

Cons: Potential for Overlooking Unpaid Tax and Accruing Interest

Conversely, filing an extension doesn’t exempt you from penalties and interest charges on any unpaid taxes. You must still pay at least 90% of the current year’s or 100% of the previous year’s tax by the original deadline. Remember that a business tax extension involves the time to file, not the time to pay. 

Overlooking this can lead to penalties and additional interest charges, increasing your total tax liability. The IRS calculates a failure to pay penalty at 0.5% of the unpaid taxes for each month or partial month the tax remains unpaid. The date by which the IRS charges interest depends upon the type of penalty.

The good news is that failure to pay penalties cannot exceed 25% of your unpaid taxes. 

A business tax extension should be carefully considered and not seen as an easy way out.

Is a tax extension right for your business?

The answer to this question depends on your business’s unique circumstances. Here are some examples where having extra time to file could be an advantage.

1. You’re Dealing With a Complex Financial Situation

There are instances when complex financial situations justify the need for a tax extension. For example:

  • Your business has international transactions and/or multiple revenue streams

  • Your business is undergoing an audit

  • Your business is dealing with significant operational changes, such as restructuring or expansion

These situations could require extra time to ensure accurate tax reporting. In these cases, an automatic tax extension can provide much-needed breathing space.

2. You’ve Identified Some Strategic Financial Planning Opportunities

A tax extension isn’t just about buying time; it can also be a strategic move. The extended period can help businesses to:

  • Reassess their financial strategy, potentially leading to significant tax savings

  • Review and capitalize on substantial tax credits and deductions

  • Consider changes in tax treatments and accounting methods to optimize tax outcomes

Utilizing a small business tax extension can provide valuable opportunities for businesses to make informed financial decisions as well as maximize their business income tax benefits, and effectively manage their owed tax and other business taxes.

Keep in mind: a tax extension will prolong the amount of time you have to think about tax filing. And it isn’t always the right move for a business. If you can file your taxes on time, without issue, it might be best to get them out of the way asap.

Strategic Tax Planning: How Hiline Can Help

Using tax extensions to your advantage is great. But strategic tax planning throughout the year is even better—especially if maximizing deductions, improving cash flow, and increasing profitability are your goals.

At Hiline, we specialize in helping businesses graduate from reactive accounting and tax filing to growth-focused financial strategy. We can give you a dedicated team of experts to handle everything from bookkeeping, to tax filing, accounting services, spend management, HR compliance, payroll, and more.

We also set up and manage the accounting workflows, systems, and software your business needs, so your team can stay agile and focused on other areas of the business.

If you need a better accounting partner to move your business forward, connect with a Hiline advisor and learn how we can help.

Frequently Asked Questions

What happens if you miss the business tax extension deadline?

If you miss the business tax extension deadline, you may incur a late filing fee of 5% of the unpaid tax amount every month, capped at 25% of the taxes you owe. It is important to file on time to avoid these penalties.

How much does a business tax extension cost?

Filing a tax extension for a business does not incur any cost or penalty, whether filed by mail or electronically.

How do I file a 2023 business tax extension?

To file a 2023 business tax extension, complete the appropriate form for your business type—Form 4868 for sole proprietors and single-member LLCs and Form 7004 for S corporations, C corporations, Partnerships, and multi-member LLCs—and submit it to the IRS. This will give you additional time to prepare and file your tax return without penalties.

How long is a tax extension for an LLC?

A tax extension for an LLC provides an extra six months to file the tax return. For example, if the tax return is initially due on April 15th, the extended due date would be October 15th.

What is a business tax extension?

A business tax extension allows businesses extra time to file income tax returns.

 

author avatar
Connor DeHaan

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