Business Tax Extension Deadline on the Horizon

Business Tax Extension Deadline on the Horizon

Business Tax Extension Deadline on the Horizon

Business Tax Extension Deadline on the Horizon

With the business income tax extension deadline just around the corner, it is a good time to examine the issue of business tax compliance and its importance to the successful functioning of business entities of all types. Although the upcoming extension deadline applies specifically to income tax, businesses are responsible for paying numerous other types of taxes in addition to those based directly on taxable business income. Each of these, including sales, excise, payroll and international taxes, has their own reporting deadlines and filing requirements, making the job of business tax compliance both complex and demanding.

Because of the way the tax calendar is structured, the September 15th income tax extension deadline applies to business income tax returns that were originally due on two separate dates. The original filing deadline for both Corporations and S-Corporations with a fiscal year beginning on January 1st is the 15th day of the third month (usually March 15th) following the close of the tax year. These entities can apply for a six-month tax extension, typically making the extended tax return due on September 15th. Although the original income tax deadline for Sole-Proprietorships, Partnerships and LLCs is usually April 15th, their extension deadline is also September 15th due to the fact that they are typically granted a five-month, rather than a six-month, extension.

Even when a tax extension is granted, it is important to realize that the IRS expects any income taxes due to be paid on or before the original filing deadline. Most businesses can come up with a fairly accurate estimate of what they owe by simply multiplying the taxable income of the business by the current business tax rate and then subtracting the amounts of any estimated tax payments made during the year. While this method does not take into account business expenses or available tax deductions and tax credits, it does give a rough estimate of income taxes owed for the year. This is important to note because any back tax balance that is carried forward from to the original filing deadline to the September 15th extension date will accumulate both penalty and interest charges for each month or partial month that the tax liability remains unpaid.

While interest and failure-to-pay penalties will be assessed on any past due tax, failure-to-file penalties can be avoided by applying for a tax extension and then filing a completed tax return on or before the extension deadline. These financial consequences highlight the importance of business tax compliance as any one of them can significantly increase the tax burden of a business with an outstanding tax liability. Interest on a back tax balance is compounded daily at a rate equal to the federal short-term interest rate plus 3%. On top of this, failure-to pay penalties are assessed at a rate of 0.5% of any tax amount owed for each month or partial month that the outstanding balance remains unpaid. It should be noted that businesses who file for a tax extension and pay at least 90% of the tax amount due at the time the extension is filed are exempt from failure-to-pay penalties.

If your business is seeking business tax or business accounting solutions, our experienced professionals can provide you with the expertise you are looking for. Visit us today at www.businesstaxpreparation.com to learn more about our full range of business tax and accounting services. Contact us by email at info@businesstaxpreparation.com or by phone at (866) 676-9417 to receive a free, no obligation consultation.