If you’re a business owner bracing for 2025 tax deadlines, this article will help you with filing a business tax extension. Learn helpful steps, IRS forms, deadlines, and more.
What Is a Business Tax Extension, and Why Might You Need One?
A business tax extension gives you extra time to file your tax return, which can be vital if you’re not ready to meet the original due date. By submitting an extension request before the filing deadline—whether you’re using IRS Form 7004 for a federal extension or Form 4868 for individual or sole proprietorship income tax—you avoid late-filing penalties, provided you estimate and pay your tax liability on time. Many small business owners file an extension when they need more time to organize financial records, accurately calculate business income tax, or finalize tax deductions.
But, keep in mind that a tax extension only gives you additional time to file, not to pay. You’ll still need to pay your taxes by the original due date. Extensions can be especially useful for businesses waiting on critical forms or dealing with complex federal tax return requirements. Filing an extension provides peace of mind, allowing you to submit a more accurate return while avoiding last-minute errors that could lead to IRS inquiries.
How Does a Business Tax Extension Work?
The IRS allows business owners to file an automatic extension of time for their tax return through Form 7004, but it doesn’t extend the time to pay. You’re still expected to file your tax return and pay any taxes owed by the original deadline. An extension helps you avoid late-filing penalties, and it gives you an additional six months to file the paperwork correctly. However, if you underestimate your tax liability and underpay, you may face interest on unpaid tax and potential penalties.
For the extension process, make sure to calculate your business income and federal tax estimates accurately, as the IRS requires this information on the extension form. Filing form 7004 is a straightforward way to get an extra six months to file without incurring penalties on your business return. Remember, though, this only applies to certain types of business tax returns, so ensure you file the correct type of tax return based on your type of business.
Which Businesses Can File for Extensions?
Most businesses, from small business owners to larger corporations, can file for an automatic extension with IRS Form 7004. The type of business you own determines which tax form to file. Multi-member LLCs, partnerships, and corporations typically use Form 7004 for an extension of time to file certain business income tax returns.
However, if you’re a sole proprietor or single-member LLC, your business income is reported on an individual federal tax return, so you’ll need to file Form 4868 instead to request an extension. This will cover the Schedule C form on your individual tax return, giving you additional time to organize and file personal and business taxes together.
Further Reading: Maximize 2025 savings with essential small business tax deductions
What Are the Key Deadlines for Filing a Business Tax Extension in 2025?
When Are Extensions Due for Different Business Types?
The due date for the tax return varies based on your business structure. Corporations and partnerships using Form 7004 need to submit their extension request by March 15, which is typically the original tax filing deadline for these types of business.
Sole proprietors and single-member LLCs, who report business income on a federal tax return, follow the individual tax filing deadline, usually April 15. If a deadline falls on a weekend or holiday, the extension deadline shifts to the next business day.
Missing the deadline for an extension form can lead to late-filing penalties, so it’s critical to file by the original due date. Extensions give you more time to file your return, but the IRS will still expect a payment with your extension if you owe federal taxes.
How Does the IRS Handle Extensions During Disasters?
In federally declared disaster areas, the IRS often grants an automatic extension for affected businesses. This means your original due date may be adjusted, and the IRS may offer additional time to both file your return and make your tax payment without penalty.
If your business is in a disaster area, you may automatically receive extra time to file your return and any federal tax payment due, ensuring you’re not penalized during unexpected situations. Keeping an eye on IRS announcements can help you confirm whether your business qualifies for this special extension of time.
How to File Your Business Tax Extension with IRS Form 7004
What Is IRS Form 7004, and Who Should Use It?
IRS Form 7004 is necessary for businesses looking to file a tax extension form and secure more time to submit their tax return. This form is for partnerships, multi-member LLCs, S-corporations, and C-corporations. When you file Form 7004, the IRS grants an automatic extension of six months to complete your federal tax return, which can be especially helpful if you’re a small business owner with multiple income streams or complex financials. Filing Form 7004 ensures your extension is processed correctly, reducing the stress of meeting the tax deadline without rushing.
Steps to Complete and Submit Form 7004
- Estimate Your Tax Payment: Begin by calculating your estimated tax liability based on your business income. Being accurate here is critical, as the IRS expects you to pay taxes owed by the original deadline. Any unpaid tax may accrue interest and penalties, even with the extension.
- File Electronically: Submitting IRS Form 7004 online via the IRS e-file system is the fastest, most reliable method. Filing extension online confirms immediate processing, helping you avoid mailing delays. This option is particularly beneficial if you’re close to the deadline and need quick verification that your application for automatic extension is accepted.
Completing these steps allows your business to take full advantage of the extra time to file your tax accurately, ensuring you stay in compliance and avoid penalties during tax season.
Further Reading: Buy time to file your business tax return
What Are the Potential Penalties If You Miss Filing or Payment Deadlines?
Missing deadlines for filing or paying your small business tax can lead to costly penalties. Both the IRS and many state tax authorities impose penalties if you miss these deadlines, so knowing what to expect can help you avoid unnecessary expenses.
Penalties for Late Filing vs. Late Payment
Late filing is the costlier mistake. For every month (or part of a month) your small business tax forms are late, the IRS charges a penalty of 5% of the tax you owe, maxing out at 25% of your unpaid balance. If you need more time to file and aren’t ready by the original tax year deadline, submitting an extension for your small business can help you avoid this fee.
The late payment penalty is lower—generally 0.5% of the tax you owe each month, up to 25% as well. Filing on time but missing payment is less severe, but if you delay both filing and payment, these penalties will stack. Remember that a tax extension doesn’t give extra time to pay; it just allows you more time to file your return.
How Does Interest Accrue on Unpaid Taxes?
Interest on unpaid tax compounds daily, making it essential to pay as much as you can by the original deadline. The interest rate is based on the federal short-term rate plus 3%. Whether you file for an extension or not, interest starts accumulating right after the deadline if there’s a balance due.
If you owe tax and can’t pay in full, get an extension and consider requesting a payment plan to avoid escalating interest. Working with a tax preparer can also help you evaluate your options and minimize penalties. The IRS and many states offer installment plans, which can be arranged using an online application or by consulting a tax help professional.
Key Takeaways
- File Business Tax on Time: If you file business tax late, you’ll face a 5% monthly penalty on any unpaid amount, capped at 25%.
- File for a Business Tax Extension: If you’re looking to file a late return, submitting an extension can help avoid the steep late-filing fee.
- Small Business Tax Extension Tips: Request a business tax extension to get more time to submit paperwork, but remember that an extension doesn’t delay payment.
- State Extension Requirements: If your business operates in multiple states, check each state extension rule since some require you to file separate extensions.
- File a Small Business Tax Return with Confidence: Using an extension can give you peace of mind to prepare accurate returns, especially if you're gathering complex data.
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