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Filing federal tax returns and paying business taxes is an important part of running a small business. But it’s one of those things some business owners forget about until it’s too late, then it’s a mad scramble to submit everything on time.
Well there is good news.
If you need more time to file your return, you can file an extension. Keep reading to learn more about tax filing deadlines and when and how to properly request an extension.
tax filing deadline
According to the Internal Revenue Service (IRS), in 2022 tax filing deadline for most was 18 aprilth, the date was after 15 aprilth Due to the recognition of the Emancipation Day holiday in the District of Columbia. In most years, the filing deadline for US businesses is the first business day on or after the 15th day of the fourth month of the year. However, the actual filing deadlines and required tax forms for businesses depend on how the entity is legally structured.
A sole proprietorship A business run by an individual is where the business and personal assets are tied together. It can describe people who are self-employed, as well as independent contractors. Sole proprietors do not take any action to legally form their business because the business activities will automatically designate a sole proprietorship. Business activities are not taxed separately by the individual and are reported on Schedule C and Form 1040.
The tax filing deadline for sole proprietorships is April 15.thAlthough the IRS had set that deadline as April 18.th In 2022.
partnership Describe a small business structure where two or more people agree to carry on a trade or business together. Each partner shares in the profits and losses of the business. The general partnership files an informational tax return and issues a K-1 statement to the partners. The partners then record taxable income or loss with their personal income tax returns.
The tax filing deadline for partnerships is 15th day of the third month after the end of the tax year. The partnership had a deadline of 2022 March 15th,
limited liability companies
A limited liability company (LLC) is a cross between a corporation and a partnership. LLCs may be owned by a limited number of shareholders or may operate as a single-member LLC. The IRS does not recognize an LLC as a separate tax entity, so income is passed through to the members. LLC needs file income tax return As a corporation, partnership or sole proprietorship.
Tax filing deadlines for LLCs depend on whether the entity files as a corporation or a sole proprietorship.
S corporations (S corp) comply with corporate obligations, such as passive income tax and built-in gains tax, but avoid double taxation by electing to elect as an S corp. Business owners pay taxes on their share of the income through their personal tax returns.
The tax filing deadline for S corporations is May 15.th day of the third month after the end of the tax year. The partnership had a deadline of 2022 March 15th,
A general corporation, or C corp, is treated as an entity separate from its owners in terms of profits and legal liability. C corporations pay and file business taxes on their profits and then each shareholder pays taxes on the dividends they receive.
The tax filing deadline for C corporations is May 15.th Day of the fourth month.
What is business tax extension?
so what if you can’t File Your Small Business Income Tax Return on time?
A business tax extension will give you an additional six months to gather the necessary documents and complete the return without penalty. Individuals and businesses may file one extension for each tax year. Approval is generally automatic, and Extensions are rarely rejected if filed correctly and on time., In addition to the federal tax extension, businesses are also required to file an application State tax authority.
If income tax due date is 15th Aprilth For business types including sole proprietorships and C corporations, the extended deadline will be 15 Octoberth,
If the business, partnership or multiple-member LLC tax deadline is March 15th, file extension create a new deadline 15 Septemberth,
pay estimated income tax
Filing an extension does not exempt the business from tax. Any outstanding tax liability is still due by the return deadline and the business owner is subject to a punishment and interest charges if not paid. Since applying for an extension indicates that the business income return has not been completed, taxpayers must pay estimated tax by the due date using the mail or online EFTPS,
To calculate the amount of tax you owe, you can use a worksheet Provided by the IRS. Small business owners who aren’t sure of the amount of tax owed should err on the side of caution and overpay. If the estimated tax paid is more than the tax liability computed on the return filed, the taxpayer will be entitled to a refund of the tax.
If cash flow becomes a concern, consider business financing options to pay estimated taxes on time. Small business owners can often qualify for a secured or unsecured line of credit, such as a property management company Who are eligible for an unsecured business line of credit with Biz2Credit. There are also options to set up payment plan with the IRS.
Reasons to File Extension
The IRS penalizes individuals and business owners who underreport their tax liability, file income tax returns after the deadline without a formal extension request, or fail to provide required documents and information related to income. However, there is no penalty for filing an extension.
When to request an extension
If you are concerned that you will be unable to file your income tax return by the deadline due to any of the following reasons, then filing an extension is a good decision.
you have missing documents
To effectively file an income tax return, there is a list of information and documents required by the IRS, tax professional, bookkeeping firm, or tax software. If you do not have any of the following documents, the extension will allow time to collect the information. Missing required documents may also affect your eligibility for tax deductions and tax credits.
- financial statement
- Schedule K-1s
- Form 1098 for mortgage interest and property taxes
- capital asset activity
- expense receipts
- w 2s
You are enrolled in a SEP IRA
A Self-Employed Pension (SEP) IRA is a popular retirement contribution option for small business owners, sole proprietors, and freelancers because it allows them to make larger, tax-deductible contributions. Filing a tax extension allows more time to contribute to the plan. Once an extension is requested, additional contributions made up to the extended deadline will be counted as funds in the account for the previous calendar year.
you are facing extraordinary circumstances
You do not need to provide an explanation to the IRS as to why you are requesting a tax-filing extension. Experiencing a family emergency, unexpected travel, business interruption, change in finance personnel, or any other reason qualifies a person or business for more time to file their income tax return.
When No to request an extension
While there is no penalty for requesting an extension, there are circumstances when filing for an extension is not necessary.
In the following tax situations, an individual or business is granted an automatic extension, so it is unnecessary to do the required paperwork for longer periods of time.
- S citizens living and working in a different country
- Residency in a part of the US affected by a severe natural disaster
- military personnel serving overseas
- Employment (for self or spouse) in a combat zone for the US Armed Forces.
Extending the deadline for business income tax returns is delaying the inevitable. If there is no significant reason to extend the due date, such as missing documents, it makes more sense. file return Then go through the process of filling out the extension. For some individuals, including sole proprietors and single-person operations, filing a single tax return may be more efficient than filing an extension.
How to File a Small Business Tax Extension
Request Process a small business tax extension Not too hard, and in most cases, it can be done completely online.
collect necessary information
To file an extension, you will need some of the same basic information about your business as you would for filing an income tax return. Gathering identifying information and documents ahead of time will expedite your application for an extension and help prepare you for filing your income tax return.
- Identity and residence information
- Taxpayer Identification Number (TIN)
- bank details
- year end financial statement
select the correct form
IR Provides forms and instructions for individuals and business owners who wish to file an extension. To find the correct form, use the details below or seek tax advice a cpa,
Form 4868 An application for an automatic extension of time to file a US individual income tax return. The form is most commonly used by individuals who file Form 1040 to report income. Form 4868 also applies to small business taxes when the income tax liability is passed on to the owners, which includes:
- sole proprietors
- Single Member LLC
- owner of partnership
- Multiple-Member LLC Owner
- S corporation owner
Form 7004 There is an automatic extension of time to file certain business income tax, information and other returns. It is similar to Form 4868 but is not applicable for individual income tax returns. Form 7004 is best for business tax returns:
- c corporation
- s corporation
- Multiple Member LLC
It is an extension of time for payment of taxes by a corporation expecting a net operating loss carryback. Form, This extension request is used for corporations that expect net operating loss (NOL) in the current tax year. Filing Form 1138 gives the corporation more time to pay taxes owed from the immediately preceding tax year.
Form 1138 is best for:
- any business structured as a corporation
IR Form 8868Application for Extension of Time to File an Exempt Organization Return Used by tax exempt charitable organizations or non-profit organizations to receive automatic 6-month filing to file. Form 990Information return required for tax-exempt businesses.
This form is best suited for:
- Non government organization
- Other entities exempt from paying federal income tax
These other extension forms can benefit business owners in having additional time to prepare documents and pay employment taxes:
- Form 5558 – Application for Extension of Time to File Certain Employee Plan Returns
- Form 8809 – Application for Extension of Time to File Information Return
Most tax extension forms can be completed via e-file, but you can also print, fill out, and mail forms from the IRS website. Remember to submit the application before the tax return deadline. Once you’ve applied for an extension, you can check with your state to see if you need to file a separate extension form and the extended deadlines for filing your federal and state returns. Start preparing for it.
Due dates and required forms for income tax returns and extension requests depend on your company’s business structure. Filing a request for an income tax extension doesn’t give your business more time to pay taxes, but it will give you a six-month extension to file returns. Getting an extension is a simple process that begins with downloading the proper forms on the IRS website.