What Is the Benefit of Filing a Tax Extension

There are many reasons why you may not be able to make your tax filing deadline. Despite your best attempts, circumstances beyond your control may have prevented you from doing so. And let’s face it: sometimes life just gets in the way. Fortunately, you can request an extension that gives you up to six extra months to file your return. There are a number of benefits you can gain for yourself or your business if you file for a tax extension:

1. You Can Get All Your Paperwork in Order

Whether you’re filing personal taxes or business taxes, you may need more time to collect receipts or secure documentation. You may have lost your W-2 or another form you need for filing and have to request a replacement. You may also need to gather documents for deductions, like receipts for medical treatment or, in the case of home office deductions, utilities. If you have employees, you may need to pull together expense reports. Filing for an extension buys you the time you need to get all your paperwork in order.

1. You Can Deal With a Personal Matter

Sometimes life and taxes don’t cooperate. Maybe you’ve had an illness, or there was a death in the family. Maybe you’re going through a divorce – or, for that matter, getting married. Maybe a natural disaster impaired your home. Maybe your business partner isn’t working out the way you’d hoped. Any of these, and more, could be reasons why you’re unable to make your tax filing deadline. Filing for an extension allows you to delay the stress of filing your taxes and gives you the time you need to deal with personal matters in the meantime.

1. You Can Complete a Business Transition

If your business is transitioning, you may need more time to file. Perhaps you’re changing from a sole proprietorship to an LLC. Maybe you’re transitioning your business from an S corporation to a C corporation. Maybe you’re retiring and selling your business to a partner. Whatever the reason, filing for an extension delays your tax filing long enough for you to make the business transition before you worry about filing your return.

1. You May Avoid Having to Amend Your Return

Rushing to make a tax filing deadline can cause mistakes. When you realize an error has been made on a tax form you submitted, you must amend your return. Filing an amended return takes more time and if you hire a tax preparer, more money. By filing for an extension, you can ensure that your return is correct the first time, thus avoiding the cost of time and money of an amended return. We've outlined some common small business tax extensions for 2023 below:

• Sole proprietorships: October 16, 2023.

• Partnerships: September 15, 2023.

• Multimember LLCs: September 15, 2023.

• S-corporations: September 15, 2023.

• C-corporations: October 16, 2023.

In any case, to avoid penalties and interest, you should estimate any tax you owe and pay it by the above dates.

Work with Tax Professionals

Tax extensions can provide much-needed relief when life throws you a curveball that delays your tax filing process. These extensions offer additional time to compile documents and mitigate errors. Remember to pay attention to the extension deadlines for your specific business type to help avoid penalties. These processes can be tricky and working with a tax professional is highly recommended.