Business Tax Extensions: How to File in 4 Steps

Tax season can be a stressful time of year, especially for business owners with competing priorities and low bandwidth. You’re expected to dig through last year’s financials, complete extra paperwork, make tax payments, and remember due dates. 

Fortunately, a business tax extension can grant you some relief. 

If you file a tax extension, you’ll have extra time to file your returns. You’ll avoid the tax notices, penalties, and interest associated with late returns. 

You may want to file a business tax extension if you need more time to finish your return preparation activities, such as the following: 

• Finding extra deductions and credits
• Gathering final revenue and payroll figures
• Getting help with complicated calculations

To file a business tax extension, you’ll find the correct form, estimate the amount you should pay, and submit your payment with the extension. 
Keep reading for a detailed explanation of these steps to file your business tax extension confidently.

Understanding Business Tax Extension Basics

What is a Tax Extension?

Stated simply, a tax extension requests more time to file your tax return.

If you file a business tax extension before your return due date, you’ll get an extra six months to file your tax return. For example, if your tax return is due by April 15th, you would file an extension by that date. Your return’s extended due date would be October 15th. (Your extension period might vary, depending on your facts.)

Importantly, a tax extension allows additional time to file your return, not additional time to pay. Avoid interest or underpayment penalties by paying your full tax liability before the original tax return deadline. 

Don’t worry: We’re here to help you figure out what you should pay.

Types of Business Tax Extensions

• Federal Tax Extension: US businesses file income tax returns with the Internal Revenue Service (IRS). A federal tax extension grants additional time to file your federal tax return.
  
• State Tax Extension: Most states impose business taxes; South Dakota and Wyoming are the lucky exceptions. State rules vary, but many jurisdictions allow extensions.
  
• Local Tax Extension: Certain cities and counties have business taxes, including New York City and many Ohio cities.  

Business owners should also consider filing extensions for their personal income tax returns.

What Is the Deadline for Filing a Business Tax Extension? 

Business tax extensions are only valid if filed before the business tax return's due date. Your filing deadline depends on your business entity type: 

• March 15th: Partnerships, S corporations, and LLCs taxed as partnerships

• April 15th: Sole proprietorships, C corporations, and LLCs taxed as C corporations

If your business elected a tax year-end other than December 31st, your tax return due date will differ from these general rules. Check with a tax professional if you think this applies to you. 

What Happens If You Don’t File a Tax Extension and Missed the Deadline?

If you don’t file a tax extension, your return is due by the original due date. 

If you miss a tax deadline, file your return as soon as possible. You could be subject to late payment penalties and interest, but you’ll minimize fines by filing before more time passes. 

How to File a Federal Tax Extension

Step 1: Find the Correct Form and Check the Due Date

Your business entity type determines the business tax extension form you should use and its due date.  

Sole Proprietorship Tax Extension

• Federal extension: IRS Form 4868
• Original due date: April 15th
• Extended due date: October 15th

Partnership Tax Extension

• Federal extension: IRS Form 7004
• Original due date: March 15th
• Extended due date: September 15th

Limited Liability Company (LLC) Tax Extension

• Federal extension:
  • IRS Form 7004 for LLCs taxed as partnerships or C corporations
  • IRS Form 4868 for single-member LLCs
    
• Original due date:
  • March 15th for LLCs taxed as partnerships
  • April 15th for single-member LLCs and LLCs taxed as C corporations
    
• Extended due date:
  • September 15th for LLCs taxed as partnerships
  • October 15th for single-member LLCs and LLCs taxed as C corporation

S Corporation Tax Extension

• Federal extension: IRS Form 7004
• Original due date: March 15th
• Extended due date: September 15th

C Corporation Tax Extension

• Federal extension: IRS Form 7004
• Original due date: April 15th
• Extended due date: October 15th

Step 2: Estimate Your Federal Taxes

The tax you owe the IRS represents your estimated taxable income multiplied by the applicable income tax rate. Calculate your business’s taxable income by adding the year’s receipts and subtracting allowable deductions.

If you’ve worked with tax professionals and made quarterly estimated payments throughout the year, you can simply update your calculations with full-year figures. 

Since this is an estimate, you won’t know the exact dollar amount you’ll owe. Avoid underpayment penalties and interest by rounding up your estimated tax due. 

Step 3: Gather Your Estimated Payment Records

Total the estimated tax payments you made to the IRS throughout the year. Don’t forget to include prior-year overpayments you applied to the current tax year. (If you’re not sure whether this applies to you, check last year’s federal tax return.) 

Subtract the total prior payments from the estimated tax liability you calculated in Step 2. The result is what you should pay with your business tax extension.

Step 4: Submit Your Federal Tax Extension 

The IRS allows multiple extension filing methods. Choose one of the following options:

• File electronically using tax preparation software
• Mail a paper extension to the IRS
• Hire a tax professional to assist you with filing

If you file Form 4868 and plan to make a payment, you’ll receive an automatic extension by making an electronic payment through the IRS website. You shouldn’t submit a separate extension form. 

Taxpayers submitting electronic or paper extensions should carefully enter business information on the form. Include the business identification number and the estimated tax liability for the year. 

How to File State Tax Extensions

The state extension process is similar to the federal extension process. These steps apply to city and county extensions, too. 

Before digging in, review your state’s rules. Many states provide automatic extensions, which means you might not need to file a separate form. Some jurisdictions require a form sent with any payment, so check if this applies to you.

Step 1: Find the Correct State Form and Check the Due Date 

Use your state’s website to find the correct extension form for your entity type. Review the deadline instructions.

Step 2: Estimate Your State Taxes

Remember the estimated taxable income you calculated for your federal tax extension? Adjust the figure for state calculation differences such as depreciation or US treasury interest.

Multiply the result by your state tax rate to estimate what you owe. Round up in case of uncertainty to make sure you pay enough. 

If your business operates in multiple states, your calculations will have an extra step: Consider the percentage of your operations within each jurisdiction. State taxes can get complicated quickly. We recommend consulting with a tax professional. 

Step 3: Gather Your Estimated Payment Records

Have you been making quarterly tax payments? Review your payment records and total the state payments you’ve made. 

Subtract prior state payments from your estimated tax liability. The result is what you should pay with your state tax extension.

Step 4: Submit Your State Tax Extension

Review your state’s filing instructions. State rules vary, but you’ll have one or more of the following options: 

• File electronically using tax preparation software
• Submit an extension through the state’s online portal
• Mail a paper extension to the state
• Submit a payment only (no form required)
• Hire a tax professional to assist you with filing

How to Make a Payment with Your Business Tax Extension

If you’re using tax preparation software, you can likely pay your federal and state taxes through the software. You’ll be prompted to enter your bank account information before you submit your extension. 

Other payment methods include the following: 

• Sign up for the Electronic Federal Tax Payment System (EFTPS) to make federal payments.
• Mail a check to the address listed on the form instructions.
• Submit a payment online. You may need to create an account to access your state’s electronic payment system. 
• Pay over the phone. Certain jurisdictions allow taxpayers to call their automated payment line. 

Tips for a Successful Tax Extension Process

You’re now prepared for stress-free business tax extensions. Here are our final suggestions for a successful tax extension process: 

• Plan ahead. Gather your information early to avoid a last-minute frenzy.
• Stay organized. Document invoices and receipts throughout the year.
• Schedule time to prepare your tax returns and ensure a timely filing when they’re due.
• Seek professional assistance if you need help. 1-800Accountant has a multitude of resources.

Work with Accounting Experts Who Specialize in Tax Extensions

Don’t let business tax deadlines interrupt your smoothly-running business. The tax professionals at 1-800Accountant can relieve your tax season stress. We’ll support your business tax extensions today and help you prepare for accurate and timely tax return filings in the future.