Not Ready to File? How to Request a U.S. Tax Extension Based on Your Business Structure

The April 18th deadline to file your federal income tax return is almost here. Have you filed your return yet?

There is still some time left, but sometimes time slips away. Maybe you’re still waiting on documents such as a K-1 from an investment, or maybe you’ve just been too preoccupied with work and life to prepare your return. Whatever the reason may be, the IRS will grant a five- or six-month tax extension to file your return.

If you need more time to file your taxes, you should definitely request an extension sooner than later. It’s always better to extend than to file an incorrect return and have to amend it later. With that in mind, here’s everything you need to know to file for an extension.

Tax Extension Type #1: Individual Form 1040 (Including Schedule C Businesses)

It’s important to note, filing an extension grants you additional time to file your return, but not to pay the tax due.

If you expect to owe money, but you’re waiting on information or haven’t taken the time to gather all of your income and expenses, that can be an issue. You’ll need to estimate the amount you owe and send a check along with Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Filing an extension grants you additional time to file your return, but not to pay the tax due.

Keep in mind when mailing your extension and payment, send them via certified mail, so you’ll have proof that your extension was filed on time. The IRS processes an enormous amount of mail every day, and things do get lost. If the IRS claims they did not receive your payment or extension by the due date, you could get hit with penalties. If you can provide proof that the check or extension was mailed by the due date, it will be deemed as “received” on the day you mailed it, even if it is actually received days later.

If snail mail isn’t your thing, you may be able to e-file your extension using your tax preparation software of choice and make an estimated payment online using IRS Direct Pay. This secure service lets you pay directly from a checking or savings account for no additional fee, and you’ll get instant confirmation that your payment was submitted. Just select “Extension” under reason for payment and make sure you choose the correct form and tax period to let the IRS know where to apply your payment. Keep in mind that making an extension payment through IRS Direct Pay alone does not extend your return. You’ll still need to mail Form 4868 or e-file the extension.

Calculating the estimated amount due can be a challenge if you’re not prepared to file, but your tax preparer or software may be able to help. Just provide as much information as you have, then use estimated amounts for the rest. If your tax situation has not changed much since you filed last year, that’s a good place to start.

And while you’re filing your federal return, don’t forget your state return. Some states will automatically extend your state return when you file a federal extension, but some require their own form. Ask your tax preparer, or check with your state’s Department of Revenue to see which form your state uses.

Tax Extension Type #2: Partnerships, LLCs and S-Corps

If you file Form 1065 for a partnership or LLC or Form 1120-S for an S-Corporation, unfortunately, you should have filed for an extension by March 15, 2017. This is the first year that Form 1065 was due on March 15th, thanks to a bill that was passed late in 2015.

Partnerships, LLCs and S-Corps use Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns to request an extension.

Because these entities are not taxed at the entity level on their income, you don’t need to send in an estimated tax payment with your extension. Instead, you should determine the income that will “flow through” to your individual tax return and pay estimated tax with your individual extension.

If the March 15th deadline passed you by and you didn’t file for an extension, yours won’t be accepted if you submit one now. Just do whatever it takes to file your return right away—at this point, the sooner the better. The late filing penalty for Forms 1065 and 1120-S is $195 per partner or shareholder, per month (up to 12 months).  That said, a return that is filed just one day late is considered late for the entire month. So a partnership with three partners that files three months late will owe $1,755 in penalties ($195 multiplied by three partners equals $585 per month, times three months equals $1,755).

If you’ve never filed late before, the IRS has an unofficial policy to provide taxpayers with a “first-time abatement” for the forgiveness of late penalties. You’ll likely have to send a letter explaining the reason for your late return.  Penalty abatement is given at the IRS’s discretion, but it’s generally given to most taxpayers as long as it is their first offense.

Again, make sure you take your state return into account. As with individual returns, some states piggyback on the federal extension, others require their own form. Talk to your tax preparer or contact your state’s Department of Revenue to make sure you’ve taken care of your state extension.

Tax Extension #3: Corporations

C Corporations filing Form 1120 have until April 18, 2017, to file for an extension this year. In previous years, taxpayers had to file Form 1120 by March 15th. Essentially, the deadlines for filing Form 1065 (mentioned above) and Form 1120 swapped this year.

As with partnership, LLC and S-Corp returns, C Corporations use Form 7004 to file for an extension. The extension can be e-filed or mailed, but you should send it via certified or registered mail for proof of mailing if you choose not to e-file.

Like individuals, C-Corporations must pay any tax due by the April 18th deadline, regardless of whether or not they file for an extension. Some corporations may mail a check for their estimated tax payment, but other are required to make payments using the Electronic Federal Tax Payment System (EFTPS).

If snail mail isn’t your thing, you may be able to e-file your extension.

Any business can voluntarily use the EFTPS system to make federal tax deposits, but businesses with a federal tax liability (including income, payroll and excise taxes) exceeding $200,000 in any calendar year are required to use EFTPS starting with the second succeeding calendar year.  You can enroll online, then make payments online or by phone. For more information on the EFTPS system, check out IRS Publication 4990, EFTPS Payment Instruction Booklet for Business and Individual Taxpayers.

Keep in mind that some tax preparers raise their fees in the weeks leading up to the April deadline to discourage last-minute filers so you may be able to save a few bucks by filing for an extension. Plus, you or your accountant will have some extra time to review your return and make sure everything is complete before sending it in.

about the author

Freelance Contributor Janet Berry-Johnson is a CPA and a freelance writer with a background in accounting and insurance. Her writing has appeared in Forbes, Parachute by Mapquest, Capitalist Review, Guyvorce, BonBon Break and Kard Talk. Janet lives in Arizona with her husband and son and their rescue dog, Dexter. Outside of work and family time, she enjoys cooking, reading historical fiction and binge-watching Real Housewives.