Business Tax Extension: Tax Planning Guide - SmartAsset

Most businesses can get an extension of six months to file a federal income tax return by filing Form 7004. No explanation for making the request is necessary and the extension is automatic. However, filing Form 7004 only grants more time to file the return. It doesn’t extend the time allowed to pay the tax. Filers sending in Form 7004 have to calculate how much they’ll owe and send payment in with the form or risk being subjected to penalties and interest on the unpaid amount. Also, the form has to be filed in most cases by the original due date for the business return. Consider talking to a financial advisor for help with your business taxes.

Business Tax Extension Basics

A business that is not ready to file its federal income tax return can get an extension, usually of six months, beyond the usual date it would be required to file. All that is necessary is to properly complete Form 7004 and send it along with payment for the estimated amount of taxes due to the Internal Revenue Service on or before the return’s original due date.

Granting the extension of time to file is automatic for any eligible business and does not require explanation or justification. As long as the form is filled out correctly, includes payment of properly estimated taxes due and is sent in by the due date, the extension request will be granted. The IRS won’t notify files if an extension is approved, but will alert those whose request is not accepted for any reason.

Businesses including corporations and partnerships can all use Form 7004. Individual taxpayers can request a similar automatic six-month extension to file using Form 4868. As with the business extension, individual taxpayers have to pay the amount of taxes due when they file Form 4868. Businesses organized as sole proprietorships and single-member LLCs, which report income and losses on Schedule C, also use Form 4868 rather than Form 7004

Form 7004 Requirements

The extension form in most cases must be filed by the normal date on which the business return is due. If the return or extension request isn’t filed by that date, the business may be charged penalties and interest. The IRS may also levy penalties and interest if a firm files by the due date but the form is not completed properly or the filer has not paid enough due to underestimating the tax that will be due.

The due date varies depending on the type of business entity. For instance, a partnership or S Corp must file its Form 7004 or the actual return by 15^th day of the third month after the end of its tax year. A C Corp’s due date is the 15^th day of the fourth month after the end of its tax year.

Other Business Tax Extension Considerations

Form 7004 can be filed electronically for most business returns. However, if the extension request form is filed on paper and the tax return is filed electronically, it could result in a penalty if the return is processed before the extension request.

Some state taxing authorities will accept Form 7004 as a valid reason to give a business an extension of the time to file state income tax returns. However, not all states will do this. Filers may have to file separate state income tax extension requests depending on local laws and relations.

A parent corporation can file a single Form 7004 covering all corporations it controls as long as the entire group files a consolidated return. Otherwise, each business has to file a separate Form 7004 request.

The Bottom Line

Tax Form 7004 can be used by businesses to request additional time to file their federal income tax returns. The form grants businesses an extra six months, in most cases and is automatically granted as long as it is filed by the due date and includes payment of taxes that will be due. The form does not grant an extension of time to pay the income tax that is due.

Tips for Tax Planning

A financial advisor can help you manage your tax liability as well as consult on all your financial affairs. With a proper tax plan, you may not need to extend and you could reduce your total tax liability. If you don’t have a financial advisor, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset’s Federal Income Tax Calculator can give you an estimate of how much you’ll owe in federal income taxes. To use this free, online tool, enter your household income, location and filing status. The calculator will estimate how much you’ll have to pay for the current tax year, including FICA taxes.