Life often gets hectic for small business owners. During these times of stress, it’s not uncommon to miss dinners, forget dance recitals, and adjust deadlines.
Even major initiatives like tax filing can sometimes join this list. Tax season is difficult enough for individuals with 9-to-5 jobs, so it can take on a whole new level of complexity when adding entrepreneurship to the picture.
You can minimize these negative effects by partnering with a trusted tax professional who can help you keep documents updated and then do the filing for you when the time comes. At the very least, invest in accounting software that streamlines your processes, eliminates headaches, and reduces errors. If you’re still tracking and managing your finances manually, you’re making life unnecessarily difficult for yourself.
“Ditch the paper,” insists a tax strategy guide from Forbes. “The IRS has reported less than 1% of online tax returns have errors. That number skyrockets to 21% when you file using paper returns. If this sounds like too much work, hire a tax professional and maybe a bookkeeper. Even with the best CPA, if you don’t have the right info about your expenses, you will pay more in taxes. All those small, missed deductions can really add up.”
If you find yourself in a situation where you need more time to complete your tax filing, you should consider requesting a tax extension. In addition to falling behind schedule, there are plenty of reasons to make this move:
- Extend the time to fund your retirement plans and max out your contributions
- Gather receipts or documents that weren’t available by the standard deadline
- Take the time to organize your deductions and credits
- Revisit your taxes and make sure you did them correctly
Assuming the IRS grants you a tax extension, you’ll get 6 additional months to file your tax return. Extensions that exceed this length are rare and usually reserved for businesses that operate in foreign countries.
The process of requesting an extension isn’t particularly difficult, but there are factors to keep in mind if you want to do it right.
The Forms You’ll Need
The IRS provides multiple tax extension forms. The form you need depends on your business structure. You’ll use Form 4868 if you have a sole proprietorship or an LLC with just one member. For business owners who list business profits with personal income using Form 1040, this form would also be used for requesting an extension. If you have a partnership, corporation, S corporation, or LLC with multiple members, you’ll need to request an extension using Form 7004.
Take the time to carefully review the instructions provided by the IRS to ensure you submit the correct form by the relevant deadline. If you’re asking the IRS to give you extra time, it’s always wise to use extra care to do it correctly.
If the IRS has granted you an extension, don’t wait until October to start working on your tax filing. Begin as soon as possible so you can make the most of the extra time. The extended deadline of October 15 may seem far away, but it’ll creep up sooner than you think unless you make your taxes a priority.
Here are 4 other miscellaneous factors you’ll want to keep in mind:
- Your forms must be accurate because the IRS doesn’t take kindly to errors. If you make mistakes on your tax extension forms, plan on receiving a denial.
- If the reason for your extension is complex, don’t hesitate to enlist the help of a tax expert. A little guidance can go a long way.
- If you’re at risk of not meeting the standard deadline, you should request an extension so you don’t incur any penalties. The IRS could hit you with both a late filing fee and a late payment fee.
- In addition to avoiding potential penalties from the IRS, you can often save money on accounting services by extending the deadline. Many accountants have higher fees in March and April, then lower them to attract customers during the slower months in summer.
While a tax extension can be a wise strategy, it should never be approached in a lackadaisical manner. If you’ve been sloppy with your finances and are unprepared for taxes on April 15, chances are good that you’ll still be disorganized on October 15.
To maximize the impact of an extension, you should have a plan in place. This approach requires you to identify specific reasons you’re extending and then deciding when you’ll be ready to file your taxes. By taking a deliberate approach to extensions, you can make sure the extra time benefits your business to the fullest advantage.