How To File A Tax Extension Correctly
Filing for a tax extension with the IRS is easy and can buy you time to get your papers in order, but it's important to understand that tax extensions do not apply to payment deadlines.
If you’re hoping for a return to normalcy this year, look no further than the 2022 tax filing process. After a couple of years of deadlines being pushed back, filing should be fairly standard this year, but you still may be wanting to know how to file a business extension. Fortunately, the process is fairly straightforward and we’re here to walk you through it.
The deadline to file your taxes this year is Monday April 18, thanks to a fortuitously placed weekend. If you are able to secure an extension, you will have until October 17 to file. This allows you more time to gather your documentation, fill out all required forms, and ensure that your tax return is accurate before you file.
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How Do Tax Extensions Work?
Before we dive into the specifics of filing a business tax extension for the 2021 tax year, there are a few things you should keep in mind. Filing for an extension does not give you additional time to pay any taxes due to the government, so make sure that you pay by the current tax deadline. Otherwise, you will accrue penalties and interest that increase your tax liability. Failure to pay your taxes can also invalidate your extension.
That said, if you need additional time to get your records and tax forms in order, a tax extension can give you some extra breathing room.
Should You File A Tax Extension?
- More time to ensure accuracy
- Eases scheduling conflicts
- Avoid potential late fees
- Lower tax preparation fees
- Payment still required on time
- Added complication for IRS
- Can’t add additional funds to an IRA
- No changes to filing status after April 18
The most important aspects of filing your taxes are to make sure that the information you are providing is as accurate as possible and that it is received on time. If for any reason you are struggling to obtain needed documents or you are finding that unexpected travel or other life occurrences are making it difficult to file in April, applying for an extension is perfectly acceptable. Once again, you will still have to pay on time, but an IRS extension will help you avoid any late fees and can give you added peace of mind if you find yourself scrambling in April. Also, tax preparation services tend to drop their prices and fees after April.
However, if you’re simply looking to try take out some additional deductions or figure out otherwise to maximize your return, an extension is generally not advisable. You are no longer allowed to turn a traditional IRA into a Roth IRA after April and all contributions are still due by the initial filing date. It’s also generally not a good idea to do anything that increases the chances of a potential mix-up with the IRS.
When It’s A Good Idea To File For A Tax Extension
Filing for an extension is a common practice and relatively simple. Here are a few instances where an extension can help you:
- You have missing tax information
- You have potentially inaccurate information
- You plan on being overseas
- Unexpected scheduling issues came up
When Do You Have To File For A Tax Extension?
The filing date for taxes this year is April 18, so if you need to file for an extension, you must complete and file IRS Form 4868 by that date to avoid a late fee. You can do this online or through direct mail and the extensions are almost always granted automatically. Keep in mind that even though you still have to pay by April 18, if you overpay, you will be refunded that amount once you file. Here is what you need to know for specific returns:
Does It Cost Money To File A Tax Extension?
There is no upfront cost to filing a tax extension with the IRS. But, to reiterate, you still must make a tax payment by the initial deadline in order to avoid incurring fees. If you happen to overpay, the surplus amount will be refunded to you after you file. You can file for the extension online or through regular mail, or have your tax preparation service file on your behalf. These services vary in price but generally cost between $25 and $90 for the basics.
How To File A Tax Extension In 6 Steps
Here are the quick steps to help you learn how to file a tax extension for your 2021 taxes:
- Meet the tax extension deadline
- Decide between form 4868 & form 7004 for your extension
- Complete your tax extension forms properly
- Submit your tax extension application
- Receive your tax extension confirmation
- Don’t forget to pay your taxes
Step 1: Meet The Tax Extension Deadline
|Type Of Extension||Due Dates|
|Single-Member LLC||April 18|
|Tornado Victim||May 15|
Even if you are planning on taking an extension, you’ll need to keep the original deadlines in mind because that is the deadline for when you need to file. As a reminder, individuals need to file for an extension by April 18 this year. The deadline is the same for C-corporations, sole proprietorships, and single-owner LLCs.
If you have an S-corporation or partnership, your deadline this year is March 15. If you were the victim of the recent tornadoes in Illinois, Tennessee, or Kentucky, you have until May 15 to file.
Step 2: Decide Between Form 4868 & Form 7004 For Your Extension
- Form 4868: If you are self-employed, a contractor, or a single-member LLC, you will fill out and submit Form 4868 Application For Automatic Extension Of Time To File U.S. Individual Income Tax Return.
- Form 7004: For corporations, partnerships, or multi-member LLCs, you must file Form 7004 Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.
Both of these forms are easy to fill out and takes just a few minutes to complete. Many of the most popular tax programs and software can help you complete your form and e-file it for free or for a small fee.
Step 3: Complete Your Tax Extension Forms Properly
Even though the tax extension form is simple, you’ll want to double-check that you have completed it accurately to avoid any penalties. The simplest way is to file online. The IRS allows you to file for an extension through its website or you can get a hard copy of the one-page document, fill it out by hand, and mail it in, but make sure you document that you mailed it.
If you are using tax preparation software, it will almost certainly support Form 4868 extensions. Simply follow the instructions and you will receive an automated response from the IRS for confirmation.
Step 4: Submit Your Tax Extension Application
Once you have filed, your extension should be automatically accepted and you can go about using the added time to make sure that all of your documents and information is in order. The process really should only take a few minutes.
Step 5: Receive Your Tax Extension Confirmation
If you are filing online, you should receive a confirmation email from the IRS within minutes of filing. This is true when filing directly through the IRS website or through tax software. If you don’t receive the email in a timely fashion, check all of your inboxes to be sure before contacting the IRS. If you are sending your extension form through snail mail, make sure you have proof that it was sent.
Step 6: Don’t Forget To Pay Your Taxes
If you only pay attention to one of these steps, make sure it’s this one. Even if you are filing for and receive an extension, you must still make your payment on time to avoid late penalties or fees. Not being able to make a payment is never a good reason to file for an extension as the fees will accrue no matter what. Make an estimate of what your payment will be and, if possible, err on the high side. If you end up overpaying, you will receive the difference back when you file.
The Bottom Line On How To File For A Tax Extension
You’ve done it — you filed your business tax extension! You submitted the proper form on time, paid your quarterly taxes, and now have some time to make sure your 2020 tax return is in order. Don’t sit back and procrastinate, though. Those months can pass quicker than you think!
Now, it’s time to look ahead to filing your business taxes. You don’t have to do it alone, though. Check out our top tax software choices to help simplify the process. You won’t have to shuffle through a pile of confusing forms, you can take advantage of accuracy guarantees and audit protection, and you can even find hidden savings with a number of business tax deductions. Do your research, find the software that’s right for you, and make filing your taxes in the months ahead a breeze. Good luck!