Tax Season can be very overwhelming for individuals and businesses. Luckily, you can request a business tax extension by using IRS Form 4868 or Form 7004. There are many reasons why a tax extension makes sense. If you are self-employed, you can give yourself more time to fund your retirement plans. An extension also gives you more time to sort out your deductions and can help improve the accuracy of your return.
Whatever the need for your extension is, the form you use, Form 4868 or Form 7004, depends on the type of business you own. Sole proprietor businesses and LLCs with only one member use Form 4868. If you list any business profits as part of your personal income on your Form 1040, you should apply for an extension using this form. Partnerships and multi-member LLCs use Form 7004. Corporations and S corporations also use Form 7004.
One very important thing to note is that you must estimate how much you owe and send in that amount by the due date. According to the IRS, “Form 7004 does not extend the time for payment of tax”. If you do believe you owe money and do not submit the amount on time, the IRS has the right to invalidate your extension. Furthermore, if you underestimate your taxes, you may receive a costly fine and interest charges. The IRS is not known to let you extend for longer than six months, although they may allow longer extensions for businesses operating in a foreign country.
The deadline to send Form 4868 to the IRS is April 15 for sole proprietor businesses and LLCs with only one member. Partnerships and multi-member LLCs have a deadline for April 15 as well for Form 7004. On the other hand, Corporations and S corporations using Form 7004 have until March 15 to file.