What is a tax extension and why you might need it
A tax extension is a document that allows individuals and businesses to put off filing for a tax return for a certain period of time. Businesses typically file for tax returns before April 15, so an extension allows more time to organize financial records and complete paperwork. According to the IRS, it’s important to note that tax extensions do not apply to tax payment.
IRS forms you might need depending on your circumstances
You may need to complete additional forms to file for a tax extension. The IRS provides the following forms to business owners who want to get an extension on their tax return:
Form 7004
Entitled "Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns," Form 7004 allows businesses to automatically request a six-month extension for their income tax return.
Form 1138
Entitled "Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss Carryback," Form 1138 allows companies to potentially gain a tax return from the previous year, in order to balance out a loss of profit in the current year.
Form 5588
Entitled "Application for Extension of Time To File Certain Employee Plan Returns," Form 5588 helps companies gain more time to work onemployee tax returns. This can ensure that each employee gets the correct amount of return for their taxes.
Form 8868
Entitled "Application for Extension of Time To File an Exempt Organization Return," Form 8868 provides businesses that are exempt from federal income tax to get an automatic three-month extension to file their tax return.
How long are tax extensions?
According to the IRS, the length of tax extensions can vary depending on the forms you use, but the typical length is six months. Because the deadline to file taxes is April 15, this means you may have until October 15 to file your tax return.
How to file for a tax extension (steps to take)
Follow these steps to file a tax extension:
1. Gather important company documents
Just as you would before getting ready to pay your taxes, make sure you have important documents and information ready when filing for a tax return extension. You might need to enter your employer identification number, taxpayer identification number and your company’s financial records,like balance sheets and income statements.
2. Go on the IRS website and select an extension form
Go to the IRS website to choose one of the four extension forms for businesses. These include forms 7004,1138, 5588 and 8868.
3. Download the form and fill it out
Download the form that best fits your business needs and follow the instructions to complete the form electronically or on a hard copy.
4. Choose between mail or online sending method
On the IRS website, you can choose an electronic method to send your extension form, or you can mail a printed copy to the address they specify.
Tax extension frequently asked questions
Here are some frequently asked questions about tax extensions:
Do I need to pay my taxes in order to get an extension?
According to the IRS, you do not need to pay your taxes toget an extension. However, you do need to ensure that you request an extension before your return date (April 15.)
Can I extend my tax extension?
According to H&R Block, you can take>only one extension
Is it bad to get an extension on your taxes?
No, it’s not bad to get an extension on your tax return and you won’t incur any penalties or fees if you file within the extension period you’re granted. It can help prevent error and give you and your company more time to prepare.
