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Companies should file annual federal earnings tax returns by a set due date. Nevertheless, the principles impacting submitting extensions are sometimes complicated, which is liable for enterprise tax extension myths that folks consider. Discover out what’s true so that you gained’t be held accountable by following myths that haven’t any benefit.
For partnerships and S companies on a calendar yr, the deadline is March 15, 2024; for calendar-year C companies and sole proprietors, the deadline is April 15, 2024. Companies that may’t meet the deadline might get hold of a filing extension.
Tax Extension Myths
Listed here are 5 myths…and the realities of submitting extensions.
Fantasy: You want a very good cause for requesting a submitting extension.
Actuality: You don’t want to present a cause to the IRS when requesting a submitting extension. Frequent the reason why extensions are used are lacking data wanted for return preparation, busy CPAs or different tax return preparers, or simply procrastination. Once more, regardless of the cause a enterprise might have for wanting an extension, it isn’t related to asking for and acquiring extra time to file.
Fantasy: No motion is required to acquire a submitting extension.
Actuality: Whereas there are some conditions that lead to computerized extensions (defined later), normally, to get an extension, it’s worthwhile to request one no later than the unique due date of the return.
- C companies, S companies, and partnerships use Form 7004 to ask for an extension.
- Sole proprietors and unbiased contractors, who file Schedule C (or Schedule F for farmers) with their Type 1040 or 1040-SR, use Form 4868 or make an estimated tax fee indicating it’s for functions of an extension.
As talked about, there are a number of conditions the place extra time is robotically granted for submitting a return; no request is required.
- Sole proprietors who reside overseas have two extra months to file and may then request an extra 4 months.
- The IRS might grant further submitting time for victims of federal disasters. For instance, as a result of Texas winter storms in February 2021, the IRS announced an extension to June 15, 2021, for particular person and enterprise tax returns.
Fantasy: A submitting extension provides you extra time to pay your taxes.
Actuality: A submitting extension avoids late submitting penalties however doesn’t lengthen the time for paying taxes. For instance, a sole proprietor whose 2020 Type 1040 is due on April 15, 2021, might get hold of an extension to file the return by October 15, 2021, and keep away from late submitting penalties. Nevertheless, any taxes unpaid as of April 15 are topic to late fee penalties, which accrue till really paid.
Fantasy: A submitting extension will increase the danger of being audited.
Actuality: There isn’t any laborious or anecdotal proof that submitting a return below an extension is an audit purple flag. Returns on extension are processed in the identical method as returns filed by the same old submitting deadline. Whereas the IRS hasn’t stated so, it seems that an extension doesn’t enhance—or lower—the probabilities of being audited.
Fantasy: An extension for submitting a federal return robotically extends the time to file a state earnings tax return.
Actuality: In some circumstances, the federal submitting extension does act to increase the due date for state earnings tax returns. Nevertheless, guidelines fluctuate by state and separate state-level motion is critical. For instance, New York requires C and S corporations to submit state forms, normally electronically, to acquire a six-month extension; the identical is true for individuals and partnerships. Examine state-level submitting deadlines and the principles for acquiring extensions the place desired.
Remaining ideas
Think twice about whether or not to acquire a submitting extension. If your online business is a pass-through entity—an S company, partnership, multi-member restricted legal responsibility firm—an extension for the enterprise return will delay the data wanted by the proprietor to finish his or her private return and necessitates requesting one other extension (this one for the proprietor). Additionally, any taxpayer anticipating a refund ought to in all probability not delay submitting as a result of it merely extends the interest-free mortgage to the federal government. In case you are uncertain about deadlines, extensions, or different federal and/or state tax issues, attain out to a tax skilled.
Picture: Depositphotos
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