What You Need to Know About Tax Filing Extensions

Business owners may get nervous about having to file for a tax return extension, but it does have some benefits. This article discusses common cases where extensions are recommended and can be helpful to the business owner — even if they still have to pay estimated taxes by the April due date.

A business tax extension may help you take advantage of tax credits and incentives.

Tax laws are always changing at the state and federal level. Obtaining a business tax extension that allows you to file in September or October, for example, may allow you to gather information needed to take advantage of a tax credit or incentive such as the R&D Tax Credit.

Avoid the chaos of tax season and receive more attention from your CPA. 

Tax season is very busy, and tax professionals are working long hours. It can benefit your business to take a step back and postpone your tax preparation until after the busy season when your accountant can focus more on your complex tax needs and opportunities. It provides you and your CPA with extra time to deliberately address any questions or concerns before sending your return to the IRS. Also, if you experienced any unique events during the year, you can better handle these events without scrambling to file in season.

Receive more time to organize paperwork and avoid late penalties.

Sometimes a business simply needs more time to acquire all the paperwork for tax preparation. If your business has a busy season that coincides with the tax season, it may be best for you to file for an extension. You don’t want the IRS imposing a monetary penalty for late filing on top of any taxes owed. Filing an extension gets you extra time without your return being considered late.

Remember, an extension does not adjust the estimated tax deadlines to pay taxes owed; it simply provides you with more time to get your paperwork in order and file your return. Of course if you file for an extension use that extra time so you aren’t rushing in September or October to meet the extension deadline. Take steps during the spring and summer to get your taxes in order.

Depending on the structure of your business, if you file a business tax extension you will most likely need to file a personal tax extension. This is true for pass-through entities, such as S corporations and partnerships, where the tax responsibilities pass through to individual owners.

Anglin’s Tax Advisory Services team can help you determine if a business tax extension is right for you. Contact Dustin M. Schaefer, CPA at 256-533-1040 for information or to schedule a time to discuss your 2019 tax preparation.

You may also like our blog post on depreciation strategies.