Every year, businesses are required to file their federal income tax returns by a specific deadline. However, the rules around filing extensions can be a bit tricky, leading to some common misconceptions. Let’s clear those up so you don’t get caught out.
If you’re running a partnership or an S corporation that follows the calendar year, your deadline is March 15, 2024. For C corporations and sole proprietors also on a calendar year, you have until April 15, 2024. If you can’t meet these deadlines, don’t worry, you can apply for an extension.
Now, let’s debunk some myths about tax extensions:
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Myth: You need a solid reason to request an extension.
Reality: Nope, you don’t need to justify your request to the IRS. Whether you’re missing some records, your CPA is swamped, or you’re just a master procrastinator, it doesn’t matter. You can still ask for more time. -
Myth: Extensions are automatically granted.
Reality: Not quite. While there are some situations where you get an automatic extension, usually you need to request one by the original due date. Different forms are used depending on your business type. And yes, there are cases where you get extra time without asking, like if you’re a sole proprietor living abroad or a victim of a federal disaster. -
Myth: An extension gives you more time to pay your taxes.
Reality: Sorry, but no. An extension helps you avoid late filing penalties, but it doesn’t give you extra time to pay. Any unpaid taxes will still accrue late payment penalties. -
Myth: Filing an extension increases your chances of being audited.
Reality: There’s no evidence to support this. Returns filed under an extension are processed just like any other return. An extension doesn’t seem to affect your audit risk. -
Myth: A federal extension also extends your state income tax return deadline.
Reality: Sometimes, but not always. The rules vary by state, and you might need to take additional steps at the state level.
Before you decide to get an extension, think it through. If your business is a pass-through entity, an extension will delay the information the owner needs for their personal return. And if you’re expecting a refund, delaying your filing is like giving the government an interest-free loan. If you’re unsure about anything, don’t hesitate to reach out to a tax professional.
