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How to File a Business Tax Extension

Ted He

Ted He

Founder & CEO at TripLog
Triplog mileage tracking app business tax extension

The tax deadline is looming, but you still may need to track down some of your financial records straight or maybe something complicated came up that needs your attention instead? IRS Form 4868 will save the day!

In this article, we’ll discuss tax extensions and deadlines for businesses submitting Schedule C using Form 1040, as well as the things that can help you fill out a deadline request in proper form

Form 4868 – what is it and how to use it

Form 4868 refers to the ‘Application for Automatic Extension of Time to File Income Tax Return’, and generally it could pretty confusing if you’ve never used it (or read it) before. Basically, this is your ‘first line of defense’ of sorts, your legal right to request an extension.

The good news is that if you make your tax payments electronically, using IRS electronic payment methods then IRS will automatically extend your deadline for you without filling out Form 4868.

When will you qualify to use the form 4868?

There are a few things you need to take care of before you could actually submit the Form 4868:

  1. Estimate your tax liability with the available information
  2. Enter the estimated tax liability on the form
  3. File the form by the deadline

Keep in mind that if you do not make payment in the specified time, interest will start piling up. This means that filing an extension will not grant you an extension for making payment. You are still required to submit an estimated tax payment with Form 4868 by the filing deadline.

Allowed deadline extension time

You can extend the deadline for up to 6 months given that you were out of the country. Though it’s not a rule, other reasons for deadline extensions seldom give credit for over two months of extended time.

There’s another puzzling ‘rule’ which tightly correlates what we just discussed – the law states that you don’t actually need to explain the reason why you are asking for the deadline extension, which further means that everyone who requests it is presumed to be doing so due to the reason he/she was out of the country.

When to file the deadline extension form

The deadline for Form 4868 is April 15th. The only exceptions from the April 15th filing deadline are the states of Maine and Massachusetts. Deadline for residents living in these states is April 17. In addition, under the presumption that you were out of the country on the due date, you will be allowed an additional two months to file (and pay) your taxes without filing an extension. Keep in mind, however, that you will still owe interest.

If you are out of the country during your deadline, you may also be entitled a ‘special tax treatment’ if you pass ‘bona fide’ (in good faith) and physical presence tests. If you can neither file your return or pass one of the tests by the regular filing deadline, you will have to submit Form 2350 for a deadline extension for you to complete those tests for ‘special tax treatment’.

When you are legally treated as if you were out of the country

Simply going outside the boundaries of your home town or state doesn’t mean that you’re ‘out of the country’. The law explains two situations in which your departure will be treated as valid:

  1. If you either live or your main workplace is outside the bounds of US and/or Puerto Rico
  2. If you are in naval or US military service and only if you are on active service duty

Tips and tricks

Generally, most people will file Form 4868 by filling it out manually and sending it through the mail. However, there are other means to extend your deadline:

  • Using a tax software – most modern tax calculation/submission software comes supplied with a feature that’s capable of requesting the Form 4868 in a simplified manner
  • Use IRS’s official Free-File site – if you don’t know how to operate tax programs and how to navigate the Form 4868, heading to the IRS official Free-File site offers a great, simplified alternative to the Form 4868
  • Inquire about exceptions from general rules – there are many laws that govern taxes, as well as many exceptions from general rules. If you work for the military, or if your main workplace or place of residence is stationed outside the boundaries of the United States, you might get more time than you usually would

There are a few additional things you may want to consider when you consider filing for an extension:

  • Interest-on-interest is something you should avoid at all costs. You will owe interest for the tax you failed to file in time
  • Always check if you’re ‘legally’ out of the country or ‘de facto’ out of the country
  • Double check every paper

Even though the deadline extension forms and the procedure can seem complicated, they’re in fact very simple if you go through and fill out the form yourself. Remember that both the state and the law are there for you – nobody wants you to pay ridiculous amounts of interest. Rather, it’s in everyone’s interest to allow you to pay your taxes. One final piece of advice – don’t panic and be thorough.

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