5 Ways to Make Sure Your Tax Extension Application is Accepted
Make Sure Your Small Business Tax Extension Application is Accepted
The IRS does not reject many tax extension applications. But there are several reasons why they don't accept tax extension applications. I'll explain the reasons for rejection of a tax extension and how to make sure your application passes all of these tests.
This information is for extension applications for several types of businesses
Small businesses that file business taxes on Schedule C as part of the owner's personal tax return. These businesses are sole proprietors and single-member limited liability companies (SMLLCs). The extension application, using Form 4868, covers both the business and personal parts of the tax return
Corporate and partnership extensions (on Form 7004)
Owners of partnerships, multiple-member LLCs, and S corporations include information from the business tax return in their personal tax returns. In addition to the filing the extension for the business, these individuals may need to file an extension on their personal tax return if information from the business is delayed.
If you are filing a corporate or partnership tax return, the extension application is automatic. But you still need to file the application before the deadline and pay taxes due.
Two Warnings about Tax Return Extensions
- There is no extension on payments! To avoid fines and penalties, make sure you include the payment for your taxes along with your extension application, by the tax return due date of April 15. That includes both your personal tax liability and your business tax liability (yes, self-employment taxes too.)
- There is no extension on annual reporting to employees and contractors. Even if your business intends to file an extension, the deadline for reporting on W-2 forms and 1099-MiSC forms cannot be extended. That deadline is January 31 of the following year.
1. File on Time
Knowing when to file your extension application is tricky. In general, your extension application is due when your return is due. But knowing when a tax return - and especially a business tax return - is due can be difficult.
Each year the exact due date for returns changes, because of where the due date falls on the calendar. If a tax return due date is on a weekend or holiday, the due date is the next business day. Here's a list of tax return due dates for the current tax year.
2. Check for Errors and Report Information Changes
If you are reporting your business taxes on Schedule C, or if you are reporting income from a partnership or LLC, you will be filing your business taxes as part of your personal tax return. You will need to use Form 4868. The process of filing the extension application is fairly easy, but there are some potential pitfalls to watch out for.
- Your name and address and your tax identification information. Make sure you use the correct Tax ID number. The tax ID number on your extension is your personal social security number, not the number for your business because this application is for your personal tax return.
- An estimate of your tax liability. Your estimate must include (a) personal income, (b) business income, and (c) your self-employment tax liability if this applies. Here's a quick tax estimation calculator you might want to use. It's not exact, but it doesn't have to be. Failure to correctly estimate taxes due can result in penalties for underpayment.
- How much you have already paid (in withholding, estimated taxes, or other payments),
- The balance due, and, of course
- How much you are paying. You send in your payment along with your extension application or you can pay another way. But don't forget any payment made after the due date is subject to fines and penalties.
You do not need to file Form 4868 if you are paying your balance due electronically. The IRS will automatically process your extension application when you pay part or all of your tax electronically or by phone. Read more about tax payment options.
Pretty simple. But make sure you follow instructions.
3. Check for Errors Before Filing
Make sure you are using the correct extension application form for your business type - Form 4868 for small businesses and Form 7004 for partnerships and corporations.
Check your application to make sure you didn't make any errors.
Did your business or personal information change? For example, if you changed your address since your last communication with the IRS, they may not be able to match your tax information to the extension application information. If your business or personal information changed, you must notify the IRS in a specific way, using Form 8822.
4. Make Sure You Have the Correct Form
Before you file Form 4868, check to make sure it is for the correct year. The revision year is on the upper right-hand corner of the first page. The revision year must match the year of the return. For example, if you are filing an application for your 2018 tax return, the revision date on Form 4868 must be for 2018.
5. Use Tax Software or a Tax Professional
The best way to make sure your extension application is accepted is to use tax preparation software or a tax preparer. You can file your extension application online using the software, or you can let your tax preparer take care of filing. The software will walk you through the process, telling if you if you missed something and making sure you use the right form.
Do I Have to File an Extension Application if I Don't Owe Anything?
If you don't owe taxes or you are getting a refund, the penalty for filing late is $0, so you won't have a penalty for failing to file or for underpayment. Technically, you don't have to file an extension application in this case. But what if it turns out that you made a mistake and you do owe money? Then the late filing penalty will kick in. Just to be sure, file the extension application anyway.
What if My Tax Extension Application is Rejected?
If your extension is rejected, you can re-apply, but if you didn't file the application until the tax due date, you may have fines and penalties due. File early so if your extension application is rejected you will be able to re-file before the tax due deadline.
When Is My Extended Tax Return Due?
The time you have to complete your return depends on your business type.
For small businesses filing Schedule C with their personal tax returns, the extension deadline is October 15 of the following year. (So the deadline for a 2018 tax year extension is October 15, 2018.
For partnership tax returns, the extension deadline is September 15.
For corporations and S corporations, the extension deadline is September 15.
See this article on the tax return and extension deadlines for the current tax year.