What Do I Need To Know About Tax Extensions?

Posted on February 22, 2024

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.

What Does a Tax Extension Even Mean?

Lets answer the obvious question first.

Basically with the IRS and various states, you have an initial due date that your return needs to be filed by. This includes both business and personal. Sometimes they have the same due date and other times they are different, which we will discuss later.

There are many reasons you may not be able to file by the original due date, here are a few examples:

  • Still waiting on documents
  • Bookkeeping not completed
  • Sent information to your accountant too late
  • Simply want more time to ensure accuracy
  • and many more…

If you are unable to file your business or personal return by the original due date, you need to file an “extension”. This basically just extends the time you have in order to FILE your taxes. We will make this clear later but it’s important to note that an extension is an extension of time to file your taxes but any taxes owed would still be due on the original due date.

You will want to check with your specific state because sometimes you need to file a separate extension with your state and other times they follow or accept the federal extension.

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 payment for the rough estimate of your tax owed to help minimize interest and penalties.
    • 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 2023 And What Form Do I Use?

  • S Corporation: Extension Requests Due By March 15, 2024 – File Using Form 7004
    • Final Due Date (w/ Successful Extension): September 16, 2024
  • Partnership: Extension Requests Due By March 15, 2024 – File Using Form 7004
    • Final Due Date (w/ Successful Extension): September 16, 2024
  • C-Corporation: Extension Requests Due By April 15, 2024 – File Using Form 7004
    • Final Due Date (w/ Successful Extension): October 15, 2024
  • Personal Returns (Including Schedule C Businesses)Extension Requests Due By April 15, 2024 – File Using Form 4868
    • Final Due Date (w/ Successful Extension): October 15, 2024

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. 
  • If you did not make a tax payment on time, there would be interest tacked onto that as well. 

Important Items / Recap

  • Filing an extension does NOT increase your risk for an audit.
  • Be sure to file your extension request on time, by the original due date.
  • 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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