3 Important Considerations
When You’ve Filed a Tax Extension
It happens. You thought you could file your annual income tax return by the deadline (March 15 for corporations and s-corporations, April 15 for partnerships, LLCs and sole proprietorships), but other matters got in the way. So you submitted IRS Form 7004 or 4868 to request an extension.
What comes next? Although you gained some time to process your return, it doesn’t mean you can put your tax-filing responsibilities on hold. Here are the top three factors that come into play:
You must still pay your taxes– Yes, that’s right! Although it may seem contradictory,
the reality is that the tax-filing extension only gives you more time to file your paperwork, not to pay your taxes. At the same time you submitted your tax extension, you should have estimated any taxes you owed – and made a payment. If you didn’t do this already, plan to send a payment as soon as possible to reduce any late payment penalties and interest charges for an outstanding tax balance.
Penalties and fees may kick in– Should you underestimate the amount of tax you
owe, you’ll have to pay interest on that outstanding amount. Interest is compounded daily, accruing from the due date of your tax return until the day you pay your taxes.
Automatic extension times vary– Be aware of how much time you have to process your return. The IRS sets different extension times for different types of returns, as follows:
5 months for partnerships (including multiple member LLCs filing as partnerships)
Due date: September 15 6 months for corporations and s-corporations
Due date: September 15
6 months for sole proprietorships and single- member LLCS filing as sole proprietorships
Due date: October 15
Assuming you or your tax preparer filed an extension in mid-March or mid-April – and you paid the estimated tax bill – now you must turn your attention to getting your documentation and paperwork in order by the above dates.
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