5 Facts About Business Tax Increase

Companies have a deadline for filing their yearly federal income tax filings. However, consumers commonly believe falsehoods about business tax extensions since the laws affecting file extensions are sometimes unclear. Learn the truth so that you won’t be held accountable for believing unfounded beliefs.

The deadline is March 15, 2024, for partnerships and S corporations in a calendar year, and April 15, 2024, for C corporations and sole proprietors in a calendar year. If a business is unable to fulfill the deadline, they can request an extension for filing.

Myths about Tax Extensions

These five misconceptions about filing extensions are debunked.

Myth: You Can’t Obtain A File Extension Unless You Have A Valid Reason

Reality: When requesting a filing extension from the IRS, you are not need to provide a reason. Extensions are frequently requested due to procrastination, busy CPAs or other tax return preparers, or lacking records that are necessary for return preparation. Once more, requesting and receiving an extension of time to file is unrelated to the rationale behind a business’s request for one.

Myth: Getting A Filing Extension Doesn’t Need Any Action On Your Part

Reality: In most cases, you have to request an extension no later than the original return due date. However, there are specific circumstances that automatically result in an extension (more on that later).

• Form 7004 is used by partnerships, S corporations, and C corporations to request an extension.
• Those who file Schedule C (or Schedule F for farmers) with their Form 1040 or 1040-SR, use Form 4868, or make an anticipated tax payment specifying that it is for an extension, are considered sole proprietors and independent contractors.

As previously indicated, there are a few circumstances in which an extension of time for submitting a return is given automatically; no request is necessary.

• Foreign-born sole proprietors get an extra two months to submit, after which they may ask for an extra four months.
• For anyone affected by federal disasters, the IRS may extend the deadline for filing returns. For instance, the IRS announced an extension to June 15, 2021, for individual and company tax returns owing to the February 2021 winter storms in Texas.

Myth: You Can Pay Your Taxes Later If You File For an Extension

Reality:While a file extension prevents late filing penalties, it does not prolong the deadline for tax payment. To avoid late filing penalties, a single proprietor who has a 2020 Form 1040 that is due on April 15, 2021, may request an extension to file the return by October 15, 2021. On the other hand, late payment fines apply to any unpaid taxes as of April 15 and continue to accrue until the balance is paid.

Myth: An Audit Is More Likely To Occur When A Submission Is Delayed

Reality: There is no concrete or anecdotal proof that filing a return with an extension raises red flags for an audit. The same procedures apply to returns filed through the regular filing deadline as they do to those filed on extensions. Although the IRS hasn’t stated as much, it seems that an extension has no effect on the likelihood of an audit.

Myth: The Period to File A State Income Tax Return is Automatically Extended When A Federal Return Is Filed Later than Expected

Reality: The federal filing extension does, in certain circumstances, extend the deadline for submitting state income tax returns. State laws do differ, though, and state action is required separately. For instance, in order to receive a six-month extension, New York mandates that C and S organizations file state forms, typically electronically; the same need applies to individuals and partnerships. Verify state-specific filing deadlines and the guidelines for requesting extensions, if needed.

Concluding Remarks

Consider your options carefully before requesting a filing extension. If your company is a pass-through entity (such as a S corporation, partnership, or multi-member limited liability company), extending the business return will cause the owner to wait longer to obtain the information required to finish their personal return, which will require them to request an additional extension. Furthermore, since filing only prolongs the government’s interest-free loan, any taxpayer anticipating a refund should presumably proceed without delay. Speak with a tax expert if you have any questions concerning deadlines, extensions, or other federal, state, or local tax issues.