With this year’s tax season in full swing, you may be wondering whether or not your LLC or S Corp is eligible for a federal extension on your business taxes. While you may have good reasons for seeking an extension, you need to do so before the extension filing deadline. Whether or not you file for an extension on time, you’ll still want to make estimated tax payments early in order to avoid costly penalties. Here’s what you need to know about deadlines and payments.
Tax Extension Filing Deadlines
Filing for an extension is easy and can get you up to six additional months to file your tax returns. If you miss a tax extension filing deadline, though, it’s too late. You can’t file for one after that date.
Multi-member LLCs and S Corporations must file informational tax returns by March 15th of each year. They must also request an extension by that date. However, since the profits from LLCs (including single-member LLCs) and S Corps are passed through on the member’s or shareholder’s personal income tax returns, the deadline for those returns and tax due is April 17th, 2018. That’s also the deadline for filing for an individual income tax extension.
Making Estimated Tax Payments
Even if you file for an extension, it’s important that you make estimated tax payments on any tax you owe as soon as possible. If you owe any tax, a penalty for non-payment begins to accrue on the original filing deadline. The non-payment penalty equals one-half percent per month on the tax you owe.
If you miss the original filing deadline and also fail to file for an extension, you’re subject to a penalty for non-filing. The non-filing penalty is 4.5 percent per month on any outstanding tax.
These two penalties accumulate for five months until they reach 25 percent of the unpaid amount at the time the tax was due. After that, the non-filing penalty stops, but the IRS continues to assess the non-payment penalty. The maximum total penalty for failure to file and pay is 47.5 percent (22.5 percent late filing and 25 percent late payment) of the tax.
An extension only gives you extra time to file your return, it doesn’t give you extra time to pay. If at all possible, you should estimate how much tax you’re likely to pay and submit it by the original tax filing deadline.
Invaluable Advice from Your Accountant
A knowledgeable and trusted accountant can be invaluable in helping you file accurate returns, make payments due, file for extensions and avoid costly penalties. The good advice and assistance of an accountant goes a long way toward making your tax season less stressful and easier on your pocketbook.
1-800Accountant is changing the way businesses connect with their accounting and taxes. Through the use of an innovative and easy-to-use technology platform that combines proactive, year-round advice and planning from a team of accounting professionals, we are able to deliver accounting services both seamlessly and more affordably than ever before. Schedule a consultation today with a Tax Specialist.