Can you complete your tax return before the filing deadline?
If you can’t, you’re not alone.
Tax issues are complex, and many taxpayers are not able to gather all of their documentation and file an accurate return by the deadline. If that situation applies to you, consider filing for a six-month automatic extension of time.
This article explains the tax filing deadlines, how individuals and businesses file for extensions, and the steps you can take to file your return on time next year.
Know your tax filing deadline
You need to know the tax-filing deadline for your particular 2018 return:
- March 15, 2019: S corporation (S corp) and partnership returns
- April 15, 2019: Individual and corporate tax returns
These different filing deadlines impact when the six-month extension of time to file ends. S corp and partnership returns must be filed by September 15, 2019, while the due date for individual and corporate returns is October 15, 2019.
A critically important point: the due date for paying your taxes remains the same. If you don’t pay the amount due by the original due date, you’ll owe interest, and you may also incur penalties.
The process for filing a tax extension depends on the type of return you file.
Filing an extension for an individual tax return
If you need an extension of time for your personal taxes (Form 1040), refer to IRS Form 4868. The form explains that there are three ways to request an automatic extension of time to file a U.S. individual income tax return:
- You can pay all or part of your estimated income tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System, or using a credit or debit card.
- You can file Form 4868 electronically by accessing IRS e-file using your computer, or by working with a tax professional who uses e-file. The IRS sends an electronic acknowledgment once you complete the transaction.
- You can file a paper Form 4868 and enclose payment for your estimated tax liability.
You don’t need to file Form 4868 if you make a payment using the electronic payment options. The IRS will automatically process an extension of time to file when you pay part or all of your estimated income tax electronically, and you can pay online or by phone.
Tax software packages give you the ability to complete the steps listed above.
To qualify for an extension you must:
- Properly estimate your 2018 tax liability using the information available to you,
- Enter your total tax liability on line 4 of Form 4868, and
- File Form 4868 by the regular due date of your return.
Estimating your tax liability can be challenging, particularly if you’re requesting an extension due to the complexity of your tax return.
To compute the estimate, post all of your available tax information into your tax software and calculate the liability, and have a tax professional review your work. It’s important to estimate the liability as accurately as you can, to avoid interest and penalties, and a review by a tax preparer is worth the expense.
There are special tax extension rules for some taxpayers, including people who live outside the US. Check with a tax preparer to find out more.
Filing a businesses tax return extension
If you need to file a tax extension for a business, you file Form 7004. You’ll note that part 1, line 1 of the form requires you to post a code, which corresponds to the type of tax return your business files. Here are the most common tax returns for businesses:
- Form 1120: C corporations, and Limited Liability Companies (LLCs) filing as corporations
- Form 1065: Partnerships
- Form 1120S: S corporations
Form 7004 requires you to input a tentative total tax (estimated tax liability), your total payments, and your remaining estimated balance due.
To avoid paying interest and penalties, a business needs to make an accurate estimate of the tax liability, and pay the remaining balance by the normal tax-filing deadline.
How to avoid tax filing issues
Of course, the best way to manage a tax filing extension issue is to file your return on time, even when your tax filing is more complicated than normal.
Use accounting software to post your transactions and a system that allows you to scan receipts into your accounting records using a mobile device. When tax time comes around, your records will be organized and easy to access. Find tax software that can interface with your accounting system.
If you have an unusual event, such as the sale of a large asset or an insurance claim, ask a tax accountant to explain the impact on your taxes, and make a note about recording the transaction in your tax return.
Save time and get back to business
As your business grows and becomes more complex, so will your personal and business tax returns. Use these tips to file your return on time, and to properly file for a tax extension. This information can help you minimize the time required to file your taxes, and get you back to growing a successful business.