When you hear the word “extension,” you might think of a lifeline—an extra moment to finish a race or catch your breath. In the world of taxes, that’s not far from the truth. For many small businesses, tax season can feel like a marathon, and sometimes, a little more time can make all the difference. That’s where tax extensions come in.
In this post, we’re breaking down what a tax extension really is, what it isn’t, and why small business owners should consider using this tool wisely—not as a fallback, but as a strategic advantage.
What is a Tax Extension?
Let’s start with the basics. A tax extension gives a business or individual extra time to file their tax return with the IRS. For most businesses, that means moving the deadline from March 15 (for S-Corps and partnerships) or April 15 (for C-Corps and sole proprietorships) to September 15 or October 15, respectively.
It’s important to remember:
An extension gives you more time to file your return, not to pay your taxes.
Any estimated taxes owed are still due on the original filing deadline. If payments aren’t made on time, penalties and interest may still apply.
Why Small Businesses File Extensions
There’s no shame in needing more time. In fact, many well-organized, diligent business owners choose to file extensions for smart, strategic reasons:
1. Incomplete Information
If you’re waiting on K-1s, 1099s, or other crucial tax documents, rushing to file could lead to errors—or worse, amended returns down the road.
2. More Time for Accuracy
Extensions give you and your accountant more breathing room to ensure your return is complete, accurate, and optimized. This extra time can result in more deductions, better documentation, and fewer mistakes.
3. Strategic Tax Planning
Sometimes your tax picture changes late in the season—new purchases, investment decisions, or revenue fluctuations can affect your liability. An extension gives you time to account for those variables.
4. Avoiding Amended Returns
It’s far better to extend and file correctly than to rush and refile. Amended returns can attract unwanted IRS attention and increase your audit risk.
The Extension Process: Simpler Than You Think
Filing a tax extension isn’t as daunting as it may sound. In fact, for most businesses, it’s a straightforward process that your accountant can handle in minutes.
- Business Returns: Form 7004 is used to apply for an extension for most business entities.
- Personal Returns (including sole proprietorships): Form 4868 is used for personal income tax extensions.
At Accounting Complete, we file these extensions electronically for our clients and make sure that any estimated tax payments are properly calculated and submitted.
Personal Tax Extension Info (Yes, You Can Do That Too!)
If you’re a business owner, your personal tax return is often closely tied to your business—especially if you’re an S-Corp owner or sole proprietor. In many cases, filing a personal extension is just as critical to keeping things coordinated.
For individuals, the extension gives you until October 15 to file. Again, the key is that any tax owed is still due by April 15 to avoid penalties and interest.
Avoiding Penalties: Plan, Don’t Procrastinate
Filing an extension is not an admission of failure. In fact, it can be a sign of proactive financial management. However, extensions should never be used as an excuse to delay or avoid paying taxes. The IRS still expects prompt payment of any estimated tax due—even if the paperwork comes later.
If you do end up owing taxes and miss the payment deadline, you could face:
- Failure-to-pay penalty: Typically 0.5% per month of the unpaid taxes
- Interest: Compounded daily on the unpaid balance
- Failure-to-file penalty: If you miss both the filing deadline and fail to file an extension, the penalty can jump to 5% per month
Should You File a Tax Extension?
Here’s a quick checklist to consider:
✅ You’re waiting on important tax documents
✅ You made a significant business change late in the year
✅ You want more time to work with your CPA
✅ You’re unsure of your final tax liability
✅ You need time to gather deductions, receipts, or resolve bookkeeping issues
If any of the above sound familiar, it might be time to talk to your accountant about filing an extension—and soon.
At Accounting Complete, we don’t just help small businesses survive tax season—we help them thrive. We work closely with our clients year-round to ensure they’re not caught off guard and have a clear plan, whether they file in March, April, or take advantage of a smart extension.
Let’s make tax time a little less taxing.
Visit these links for more information on extensions and why they are important:
How Do Extensions Work?
The Role of a CPA in Business Tax Planning and Compliance