Category: Business

Do you need to complete a business tax extension application, IRS Form 7004? We have deciphered the IRS instructions to help you better understand the guidelines for requesting an extension but don’t forget that you can quickly eFile Form 7004 online with an Authorized IRS e-file Provider like TaxExtension.com. It’s important to keep in mind that when you print and mail IRS Form 7004, you will never receive an acknowledgment from the IRS that your extension has been accepted, processed and approved, you’ll only be notified if it’s rejected and more than likely, that notification will come long after the filing deadline. When you eFile with TaxExtension.com, you will be notified within minutes that your extension has been approved or rejected. If it’s rejected, you can correct and resubmit it up to 5 days after the filing deadline, and the IRS will consider it to be on time. 

Form 7004 is called the “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns”. This form consists of 3 main sections and can be used to apply for a 6-month business extension.

To be approved for a tax extension, you don’t need to provide the IRS with a reason for your extension request, but you do need to submit Form 7004 by the original due date of your return (usually March 15 for businesses). Note that the due date for some companies (C Corporations) is April 15 (the deadline for personal taxes). Keep in mind that this is not an extension of time to pay your taxes. If you have any taxes due, they must be paid by the original tax filing deadline. Be sure to enclose a check when you mail your Form 7004 if you estimate that your company will owe taxes. Keep in mind that if you eFile your tax extension, you can electronically pay your estimated taxes when you submit it to the IRS.

Here is a line-by-line guide for completing IRS Form 7004:

Business Information

Enter the name of your business on Form 7004 as you entered it on the previous year’s income tax return. The IRS will reject your business tax extension if the name you enter does not match the name they have in their database. They will also reject any extension request with an incorrect employer identification or other identifying numbers. Enter your applicable employer identification number (EIN) or social security number (SSN) and address. If your company mailing address has changed since you filed your last return, complete IRS Form 8822, Change of Address. Entering a new address on Form 7004 will not update your record with the IRS. 

Part I

Line 1

Enter the 2-digit “form code” that corresponds to the type of entity and tax return your company will file. You will find these codes listed on Form 7004. 

Part II

Line 2

Check the box on line 2 if you are a foreign corporation that does not have an office or place of business in the United States. 

Line 3

Check this box if you are requesting an extension for a corporation that is the common parent of a group filing a consolidated return. You will need to attach a list of the group’s members and include their names, addresses, and EINs (Employer Identification Numbers). For specific guidelines regarding the list format, see the IRS Instructions for Form 7004.

As a general rule, the parent corporation and its consolidated group members must all use the same taxable year. Additionally, if all members of the affiliated group are not correctly listed, the entire group may forfeit its ability to elect to file a consolidated return.

Line 4

Check this box if the organization requesting an extension is a corporation or partnership that qualifies under IRS Regulations (section 1.6081-5). These include foreign corporations with an office or place of business located in the U.S., as well as domestic corporations that:

• Conduct business and maintain books/records outside of the U.S. and Puerto Rico, or

• Earn their principal income from sources within the U.S.

Under Regulations section 1.6081-5, these types of corporations are automatically given an extra three months to file AND pay their taxes. You do not need to submit Form 7004 for this 3-month extension, which moves the deadline to the 15th day of the 6th month following the end of the tax year. Attach a statement explaining why the corporation is eligible for an extension to file and pay. Note that Form 7004 can be submitted to request an additional 3-month extension beyond that (be sure to check the box on Line 4).

There is another exception for certain partnerships that maintain their books/records outside of the U.S. and Puerto Rico. These types of partnerships are automatically allowed an extra two months to file AND pay their taxes. You do not need to submit Form 7004 for this 2-month extension. Attach a statement explaining why the partnership is eligible for an extension to file and pay. Note that Form 7004 can be submitted to request an additional extension (3 months for Form 1065 filers, and four months for Form 1065-B filers), remember to check the box on Line 4.

Line 5

If you don’t file based on the calendar year, enter the appropriate tax year beginning and ending dates.

Line 5b

If you have a short tax year, check the appropriate box for the reason that applies to you. The options listed are Initial return, Final return, Change in the accounting period, and Consolidated return to be filed. If none of these reasons apply, check the box for “Other” and attach a statement that clearly explains the circumstances that caused the short tax year.

Line 6

On this line, enter the total tentative tax that the business expects to owe the IRS, including nonrefundable credits. Enter -0- if you expect the amount to be zero.

Line 7

On this line, enter the business total payments and refundable credits. The term “payments” generally refers to estimated tax payments that you may have made during the year.

Line 8

Subtract Line 7 from Line 6 to arrive at the “balance due,” which is the amount of tax owed by the business for that year. Remember that a tax extension only gives you more time to file your return. The amount shown on Line 8 must still be paid by the original return deadline. If you electronically file IRS Form 7004, you can also make an electronic tax payment to settle your outstanding balance. At TaxExtension.com, you can eFile Form 7004 online and submit your tax payment via EFW (electronic funds withdrawal) directly from your bank account. It really could not be any easier!

If you have any questions, our helpful support team is here to guide you. eFile your business tax extension today

 

An LLC or Limited Liability Company is a business structure designed to separate the LLC’s members from the company’s debts and liabilities. Since 1997, when the IRS adopted the rule that businesses organized as Limited Liability Companies could choose to be taxed as corporations or partnerships, LLCs have increasingly become the corporate structure of choice for small businesses.

Tax Extensions for Single Member LLC’s

The member of a Single member LLC is not required to file a separate business tax return for their LLC. Profits and Losses from their LLC are reported on Schedule C of the personal tax return they file on IRS Form 1040. Of note, the fact that the LLC has an Employer Identification Number (EIN) has no impact on this.

Tax returns for taxpayers who own and operate single member LLCs are typically due on April 15th. If the taxpayer needs additional time to file, they should file a Personal Online Tax Extension or the paper version of IRS Form 4868 and mail it via the U.S. Postal Service. Please note that with paper Form 4868, the IRS never acknowledges receipt or approval of your tax extension. They will only notify you, via the U.S. Mail, if your extension was rejected. Typically this notification will be long after the tax filing deadline has already passed and late filing and late payment penalties have already kicked in.

Tax Extensions for Multi Member LLC’s

Multi-member LLC, as the term implies, is a business structure where there is more than one member. By default, the IRS treats Multi-member LLCs as partnerships but does allow the LLC to elect to be taxed as a corporation by filing IRS Form 8832, Entity Classification Election. In either event, both LLCs treated as partnership returns, filed on IRS Form 1065 and LLCs treated as corporations, filed on IRS Form 1120S, are due on the 15th day of the 3rd month following the end of the tax year, typically March 15th. To extend the LLC filing date by six (6) months, file a Business Online Tax Extension or the paper version of IRS Form 7004 and mail it via the U.S. Postal Service. As with Form 4868, the IRS will never acknowledge receipt of approval of your LLC tax extension. They will only notify you, via U.S. Mail, if your extension has been rejected, typically long after the filing deadline when late filing and payment penalties have already been triggered.

More times than not, when a Multi Member LLC files an extension, the LLC is unlikely to generate its Member’s K-1 forms in time for them to file their tax returns. It is important to remember that the LLC’s tax extension does not flow through to the individual members and that those members will need to file a Personal Online Tax Extension or the paper version of IRS Form 4868.

Tax Extensions for Multi-Member LLCs with Two Members who are a Married Couple

Multi-member LLCs who’s only members are a married couple are still treated as such EXCEPT if they live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas or Wisconsin, as of this writing) where they are treated as single member LLC’s by the IRS. Married couples should follow the rules outlined above depending on whether they live in a community property state or not. Regardless of what state the couple lives in, if the LLC has filed IRS Form 8832 and elected treatment as a corporation, they are treated as a corporation.

State Tax Extensions for LLCs

The question of whether and what type of extension you need to file with the tax extension for your LLC has several determining factors including what state you operate in and the type of LLC you have, as described above. Please consult our State Tax Extension guides to determine what, if anything, you need to file with your state.

Important: All tax extensions extend your due date for filing your return. They do not grant an extension of time to pay any taxes due. To avoid late payment penalties, it’s important to estimate what your tax liability, if any, will be for the tax year and send in at least 90% of what you ultimately owe when you file your tax extension.

 

 

Overview

An S-Corporations is an entity where a corporation’s profit or loss is “passed through” and are reported on the tax returns of the underlying shareholders. Even though the tax liability is passed to the individual shareholders, the S corp is required to file a tax return each year on IRS Form 1120S, which includes attaching Schedule K-1 that reports the profit or loss for each shareholder of the S corp.

S-Corp Tax Return Deadline (IRS Form 1120S)

S-Corporation tax returns are due no later than the 15th day of the third month following the end of the corporation’s tax year. For calendar year filers, this is March 15th or the first Monday after March 15th, in years that it falls on a weekend.

S-Corp Tax Extensions

In the event an S-Corporation is unable to file IRS Form 1120S by the filing deadline, it can file IRS Form 7004 to obtain an automatic six-month extension. Taxpayers can File an S-Corp Tax Extension Online, where the taxpayer will receive electronic notification of approval or notification of rejection in a matter of minutes, or they may complete, print and mail IRS Form 7004 in paper form. In this case, the IRS never acknowledges receipt and approval of the extension but will send notification via the United States Postal Service, when an extension has been rejected, more often than not, long after the filing deadline has past and late filing penalties have already been triggered.

S-Corp Late Filing Penalities 

The penalty for not filing either IRS Form 1120S or IRS Form 7004 by the due date is $195 per full or part of the month the return is late multiplied by the total number of shareholders of the S-Corporation. Since the maximum number of shareholders in an S-Corp is 100, the maximum late filing penalty that the IRS can impose is $19,500 per full or part of a month that the return is late, assuming 100 shareholders.

Common S-Corp Tax Extension Mistakes 

S-Corporations are more accurately described as C-Corporations who have made, what is commonly referred to as, an “S election” with the IRS. An S election is made by filing IRS Form 2553, Election by a Small Business Corporation that allows the corporation to pass through any profits or losses to its underlying shareholders. It is very common for taxpayers to either mistakenly believe that the IRS recognizes their corporation as an S-Corp when the company has either failed to file IRS Form 2553 or the IRS has not yet approved the S-Corp election. Taxpayers who file IRS Form 7004 stating that they are filing for an S-Corp as an entity type, who have either not filed Form 2553 or have not been approved as an S Corp, will have their tax extensions rejected by the IRS because of an incorrect entity type. To rectify this, ideally, the taxpayer should call the IRS or their tax accountant and speak with them about the status of their S-Corp election. Unfortunately, more often than not, corporate tax extensions are filed very close to the filing deadline, so there is little time to resolve the situation. In those case, the taxpayer can elect to file their extension with an entity type of a C-Corporation so that the tax extension is approved and then address the S Corp election with the IRS.

It is also often overlooked that when an S-Corporation is filing an extension, it generally means that the underlying shareholders will not have their K-1’s in time to file their personal tax returns and those shareholders will also need to file IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return. As with a Business Tax Extension, taxpayers can File a Personal Tax Extension Online or print and mail IRS Form 4868 in paper form. Again, In this case, the IRS never acknowledges receipt and approval of the extension but will send notification via the United States Postal Service, when an extension has been rejected, more often than not, long after the filing deadline has past and late filing penalties and interest charges have already been triggered.