Running Late With Your 1040? Get An Extension
WASHINGTON (AP) – Small business owners who aren't already well along in the process of compiling their income tax returns might want to consider getting an extension.
Returns for 2016 are due April 18, giving owners who may still be trying to complete their returns while running a business not much time to get the taxes done, and done right. And anyone who's still hoping to get invoices, receipts and bank statements to their tax preparers at this point may find they can't get an appointment — it's crunch time for accountants and tax lawyers, too.
An extension of the filing deadline will give a taxpayer until Oct. 16 to file a return.
To get more time, an individual taxpayer needs to complete IRS Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You can file it electronically or send it by mail, but it must be time-stamped or postmarked by midnight April 18, the due date for many owners' returns this year. Be sure you have a receipt for sending in the form — if you don't get an extension before the deadline, your return will be considered late and the IRS can charge you late-filing and late-payment penalties and interest.
Form 4868 requires you to estimate how much tax you owe and to pay it. If you can't pay the whole bill, pay as much as you can.
Companies known as C corporations, which also have an April 18 deadline, must use Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. The requirements are similar as those for individual taxpayers.
Some owners fear that obtaining an extension will make their returns more likely to be audited. But millions of taxpayers get extensions each year, and the IRS doesn't have the staff to audit everyone who asked for more time. Your return is more likely to be chosen for an audit if the IRS finds something questionable in your reported income or deductions. Or if you make a lot of mistakes in the return — something that may be more likely to happen if you're rushing to meet the deadline.
Some business owners routinely get extensions to help manage their cash flow. Owners also use extensions to give themselves more time to make contributions to some retirement plans; prior-year contributions aren't required until the due date of their returns, including extensions.
You can get more information about extensions and download Form 4868 at the IRS website.
Creating and managing a budget is a skill many small business owners need to learn. SCORE, the organization that gives free advice to business owners, is sponsoring an online seminar about budgeting on Wednesday, March 29, at 1:00 p.m. Eastern time. You can learn more and register here.
SCORE also will sponsor a seminar on business plans. It will be held Thursday, March 30, at 1:00 p.m. Eastern time. Learn more and register here.
– by AP Reporter Joyce M. Rosenberg