The Business Owner's Tax Extension FAQ
NEW YORK ( MainStreet) -- Millions of Americans think of April 15 as a day they'd rather stay in bed -- submitting taxes is on no one's short list for a good time. But for thousands of small-business owners, the looming deadline can be almost impossible to meet -- with 24-hour-a-day commitments to daily operations and employees, many companies will be unable to wrangle the appropriate documents in the next few weeks.
If you're thinking of filing for an extension on your taxes, experts say there's still time to get your things in order, but now's the time to get to work. Our tax gurus tackle the five most frequently asked questions for filing a small-business extension.
How do you know if you really need an extension or if you should just push on through and try to file by April 15?
"Business tax return filing is a complex and time-consuming undertaking, and, while being prepared to file on the original due date may seem ideal, there are many scenarios where businesses simply won't be able to file by that deadline," says Matt Becker, tax partner at BDO USA in Greater Grand Rapids, Mich.
For example, some businesses may be extremely busy during the first quarter and may run into situations where additional research and documentation is required, says Deborah Sweeney, chief executive of MyCorporation.com.
"In those cases, filing for an extension can be a great way to buy additional time," she says.
Some cases that may legitimately require additional time could include the need for documentation of charitable deductions or new employee paperwork.
"Some tax return positions require that you have contemporaneous supporting documentation, such as an appraisal that supports a charitable contribution deduction," says Carolyn Linkov, a principal in Parente Beard 's tax department. "If you don't have this documentation, you should extend the time for filing your return."
Once you know you need a corporate tax extension, what should be your first steps?
Most businesses will be eligible for either a six-month or five-month extension, depending on how the business is organized. Becker says.
"There is one major caveat that should be kept in mind while filing for an extension, however. The taxpayer will have to estimate how much, if any amount, is owed in taxes and pay this amount at the time of the extension request. If you fail to take this critical step, the IRS may invalidate the extension," he says.
Corporations should start evaluating their tax liability as soon as the decision is made to file for an extensions, Becker says.
"It will be imperative for you to consider all recent tax law changes as well as this year's gross income, taxable income, deductions and credits. One advantage of filing for an extension is that a business can spend more time analyzing its tax posture, making sure all available tax benefits have been realized," he says.