Filing Form 4868 for a Small Business Tax Extension
When and How to File for More Time to Prepare Your Business Taxes
What is IRS Form 4868? It's a reprieve. It's what you file with the Internal Revenue Service when you realize it's mid-April and you're nowhere near ready to file your business's income tax return yet. Even the Internal Revenue Service understands that things happen, and it offers automatic extensions of time to file.
Which Extension Form Do You Need?
Technically, Form 4868 is used for an automatic extension of time to file your personal tax return. You can use it if you file Schedule C with your personal return as a sole proprietor or as a single-member limited liability company because the profits from your business are included in your personal income. You don't have to file a separate extension for your business.
If your business is a corporation, partnership, or multiple-member LLC, you can't use Form 4868. But touch base with an accountant if you have one of these business forms. Your business will probably have to file Form 7004 instead and different rules apply.
You can file an extension for your business tax return as well as for your personal tax return. If you file a Schedule K-1 for your share of income from a partnership, LLC, or S corporation, you should receive it by March 15.
Warning: Filing an extension application doesn't extend your payment. You must pay your tax bill by the April due date.
Filing an Extension Automatically
The IRS says there is an easy way to file an extension for your personal tax return. including your small business taxes, is by paying all or part of your estimated income tax due. When you make the estimated payment, you can indicate that the payment is for an extension. You will need to use one of these IRS payment methods: Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. (Direct Pay and a credit/debit card are the easiest to use.) This way you won’t have to file a separate extension form and you will receive a confirmation number for your records.
What Does Form 4868 Do?
Filing Form 4868 grants you a six-month extension, typically until October 15. But the April tax deadline can be pushed back a couple of days from the 15th if it falls on a weekend or holiday, so the extension would be six months from the actual April date when tax returns were due in any given year.
Form 4868 must be filed on or before the April due date unless you were out of the country at that time -- you live in and your place of business is outside the U.S. or Puerto Rico. In this case, you have until June 15 to file for an extension.
How to Complete Form 4868
Form 4868 is a short form by IRS standards. It asks for:
- Your name and your spouse's name if you're married and filing a joint return
- Your address and Social Security number(s)
- The estimate of your total tax liability for the year
- The total of any payments you've already made toward your tax obligation
- The balance you still owe
- The amount you're paying with your extension request
It's easiest to submit the form online at e-file, the IRS' electronic filing program. The IRS will send you an electronic acknowledgment of receipt.
You can pay all or part of your estimated tax balance by direct debit from your checking or savings account at no cost by accessing IRS Direct Pay online. You can also pay by debit or credit card on the IRS website or by phone for a small service charge. If you want to take care of things the good old-fashioned way, print out Form 4868, fill it out and mail it to the Internal Revenue Service Center for your geographical area. Addresses are provided with Form 4868.
Form 4868 doesn't give you more time to pay what you owe -- that balance was still due by April and penalties and interest will be tacked onto any remaining balance you have after that date. This is still generally less costly than not filing the extension because the late filing penalty can be up to 10 times more. So go ahead and file Form 4868, claim your automatic extension, then pay the IRS any balance you owe as soon as possible.