Is Filing an Extension a Bad Thing? What Do I Need To Know About Tax Extensions?

Posted on March 02, 2022

We are getting close to that time of the year where a tax extension is going to be important to think about. There is so much misinformation about tax extensions out there so we want to take the time know to smooth out the details.

Is Filing an Extension a Bad Thing?

We hear from so many business owners that they were told not to file an extension because it will increase their risk for an audit. That could not be further from the truth.

  • Filing an extension has nothing to do with your risk of an audit.
    • In fact sometimes it can avoid an IRS audit because you may have some tax documents that take longer to get delivered (or never get formally delivered) and by extending it buys more time.
    • You also have the ability with an extension to request a transcript to get a listing of every form the IRS received related to your social security number so you can ensure they are all included with your filing.
  • Few Key Items:
    • You must file your extension before the deadline.
    • An extension is an extension of time to file your taxes but NOT pay your taxes. Your taxes are still due on the normal due date.
    • If you are extending we highly recommend you include a rough estimate of your tax owed.
    • If you successfully filed an extension on-time be sure to file your return by the extended deadline.

What Are The Extension Deadlines For Tax Year 2021 And What Form Do I Use?

  • S Corporation: Extension Requests Due By March 15, 2022 – File Using Form 7004
    • Final Due Date (w/ Successful Extension): September 15, 2022
  • Partnership: Extension Requests Due By March 15, 2022 – File Using Form 7004
    • Final Due Date (w/ Successful Extension): September 15, 2022
  • C-Corporation: Extension Requests Due By April 18, 2022 – File Using Form 7004
    • Final Due Date (w/ Successful Extension): October 17, 2022
  • Personal Returns (Including Schedule C Businesses)Extension Requests Due By April 18, 2022 – File Using Form 4868
    • Final Due Date (w/ Successful Extension): October 17, 2022

    What Happens If I Do Not File An Extension?

    • If you missed an extension deadline or for whatever even chose not to file an extension but still did not file your return you will be facing penalties.
      • S Corporation: $210 Per Month Per Shareholder
      • Partnership: $210 Per Month Per Partner
      • C Corporation: 5% of the unpaid tax for each month, up to 25% of the unpaid tax.
      • Personal: 5% of the unpaid tax for each month, up to 25% of the unpaid tax.
    • Note: Some penalties you can request relief from but you would not want to depend on this. 

    Important Items / Recap

      • Filing an extension does NOT increase your risk for an audit.
      • Be sure to file your extension on time by the extension deadline.
      • If you successfully filed an extension, be sure you make the final filing before the due date.
      • An extension is simply extending your time to FILE, any taxes OWED are still due on the regular due date and you could face interest or penalties if those are paid after the due date.
      • If you are extending be sure to include a payment to the IRS with an estimate of what you expect your tax bill to be.

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