5 Myths About Business Income Tax Return Extensions

Corporations must file annual federal income tax returns by a specific due date. However, the rules affecting filing extensions are often confusing, which is responsible for the myths about business tax extensions that people believe. Know what is true so that you are not held responsible by following unfounded myths.

For partnerships and S corporations in a calendar year, the deadline is March 15, 2024; For calendar year C corporations and sole proprietors, the deadline is April 15, 2024. Corporations that cannot meet the deadline can obtain an extension of registration.

Tax Rollover Myths

Here are five file extension myths…and facts.

myth: You need a good reason to request an extension of registration.

reality: You do not need to give the IRS a reason when requesting a registration extension. Common reasons for using extensions are lack of records needed to prepare the return, busy CPAs or other tax return preparers, or just procrastination. Again, whatever the reason a company may want an extension, it is not appropriate to ask for and receive more time to file.

myth: No action is required to obtain a deposit extension.

reality: While there are some situations that trigger automatic extensions (explained later), in most cases, to get an extension, you need to request an extension no later than the original due date of the return.

• Use C corporations, S corporations, and partnerships Form 7004 To request an extension.
• Sole proprietors and independent contractors, who file Schedule C (or Schedule F for farmers) with Form 1040 or 1040-SR, use Form 4868 or file an estimated tax that indicates it is for extension purposes.

As mentioned earlier, there are many situations in which more time is automatically given to file the return; No request is needed.

• The only owners who live abroad have it Two additional months to apply He can then request an additional four months.
• The IRS may grant additional filing time to victims of federal disasters. For example, due to the winter storms in Texas in February 2021, The IRS announced Extension until June 15, 2021 for individual and corporate tax returns.

myth: A filing extension gives you more time to pay your taxes.

reality: Extending a deposit avoids late filing penalties but does not extend the filing time to push Taxes. For example, a sole proprietor whose 2020 Form 1040 is due on April 15, 2021, may get an extension to file the return by October 15, 2021, and avoid late filing penalties. However, any unpaid taxes as of April 15 are subject to late payment penalties, which accumulate until they are actually paid.

myth: Extending a filing increases audit risk.

reality: There is no solid or anecdotal evidence that filing a return under an extension is a red flag for an audit. Rollover returns are processed in the same manner as returns filed within the regular filing deadline. While the IRS hasn’t said so, the extension does not appear to increase — or decrease — the chances of an audit.

myth: Extending the filing of a federal return automatically extends the time to file a state income tax return.

reality: In some cases, a federal filing extension extends the due date for state income tax returns. However, rules vary by state and separate action at the state level is necessary. For example, New York Requires C and S corporations to file state forms, usually electronically, for a six-month extension; The same applies to Individuals and partnerships. Check state filing deadlines and rules for obtaining extensions if desired.

Final thoughts

Think carefully about whether or not you want to get a deposit extension. If your business is a pass-through entity — an S corporation, partnership, or multi-member LLC — extending a business return will delay the information the owner needs to complete his or her personal return and necessitate requesting another extension (this one is for the owner). Also, any taxpayer expecting a refund probably shouldn’t delay making the loan because that only extends the interest-free loan to the government. If you are unsure about deadlines, extensions or other federal and/or state tax matters, contact a tax professional.

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