How to file an extension for business taxes
How Do I. File for a Tax Extension?
Small business owners who need more time to file their taxes can always file a form (pdf) to request from the IRS an extension to pay taxes, but there's also an option to outsource that task for a fee.
There are about 10 million businesses and 5 million individuals who file tax extensions annually out of the approximately 140 million U.S. tax filers. The IRS allows businesses to request a five-month extension while individuals can request up to six months. Sole proprietors usually have their business tax returns flow directly into their personal taxes on a Schedule C and so probably only have to file a personal tax extension form.
The IRS will approve an extension request as long as the form is completed correctly and on-time. The agency doesn't require individuals or businesses to state why they're requesting an extension on its form.
While a number of online tax-help firms offer assistance in filing an extension for individuals, FileLater may be one of only a few that specializes in filing extensions for small businesses seeking more time to complete their taxes.
The La Jolla, Calif. startup has spent the last year successfully going through the process of becoming an IRS authorized E-File provider, which means it had to meet stringent security requirements and prove to the government it was a viable partner. The company's employees also had to run through security requirements like background checks and fingerprints.
FileLater CEO Ryan Thompson acknowledges that filling out an extension form isn't extremely difficult, but says his three years working at Intuit -- the provider of QuickBooks and TurboTax -- showed him that "there's a lot of value in providing automation to individuals and businesses that do forms online. Things like peace of mind, no jargon, and ease-of-use are important."
The electronic service provided by FileLater generates a confirmation once you're approved and if your extension request is rejected, you'll get a reason why. Thompson said most of the time the IRS rejects an extension because a name doesn't match a Social Security number, a mistyped SSN or a name change due to marriage or other reasons. A FileLater client can correct and resubmit the extension form without an additional fee. Fees for the extension service currently are about $18 for an individual form and $30 for a business extension. It's offering free extensions for small businesses on Mar. 9.
FileLater also has done its research on state laws regarding tax extensions. Some states, but not all, say that if you have been approved for an extension on the federal level, you're automatically approved for the state extension. FileLater has information on the state rules, or the IRS offers a page that lists links to state sites. However, you'll have to sift through a lot of data to find what you're looking for if you do your research via the IRS state page.
"With so much pressure around these tax deadlines, if you're a small business and you don't have a good grasp how you're getting your taxes done and who is doing them for you, don't rush it," said Thompson. "[Accountants] are overworked this time of year and there's nothing wrong with sitting down with one in May or June to look at your taxes."
For more tax help, don't forget to join me for an online chat with Keith Hall from the National Association for the Self-Employed. We'll be taking questions on Monday, March 2 at 11 a.m. ET. but you're welcome to start submitting your questions now .
By Sharon McLoone | February 27, 2009; 5:00 PM ET How Do I. . Tax TipsSource: voices.washingtonpost.com