Filing a Business Tax Extension: A Guide for Startups

Sometimes, your startup may need to file a business tax extension. A tax extension is just what it sounds like—it’s extra time to file your taxes but not extra time to pay them. If you fail to pay on time, you may be subject to penalties and interest on the due tax—this includes any business income taxes you owe. Just as there are deadlines to file your taxes each year, there are also deadlines your startup must meet to file an extension. Consider this post a comprehensive guide to business tax extensions. You may also wish to learn more about startup tax in this guide. 

In this tax extension guide, we’ll explain what you need to know about deadlines, the filing process and the importance of compliance for your startup. Read on to learn more or contact Graphite Financial today for more information:

Why a Startup Might Need to File a Business Tax Extension?

Startups tend to file business tax extensions when they’re unprepared or don’t feel confident that their tax filings are either accurate or complete. In such cases, it’s often a better idea to file an extension than it is to rush through your taxes and risk tax liability errors that could be subject to an IRS audit, financial penalties or both. Other reasons why you might need to file a tax extension include incomplete records, cash flow issues or unexpected miscellaneous events.

Keep in mind that while an extension helps give startups some extra time to file taxes, it doesn’t necessarily delay payment. The best way to avoid having to file for an extension is to make sure that you’re properly planning and keeping thorough financial records to make tax season more manageable.

Key Deadlines for Filing a Business Tax Extension in 2025

Thinking of filing for an extension of your taxes? There are some important deadlines that you’ll want to know and that you must meet:

• March 15, 2025: This is the deadline for partnerships and S Corporations with corporate income tax.
• April 15, 2025: “Tax day” is the deadline to pay federal income tax for C Corporations and sole proprietors.

If a tax extension is granted, it usually means that your startup will have an additional six months to file its taxes from the deadline. Depending on your type of startup, this could be either September or October.

How to File a Business Tax Extension

If you can’t file your income tax return on time, filing for a tax extension is done much in the same way as filing for your taxes—you’ll need the appropriate form and need to meet the deadline to have the extension request accepted.

Typically, Form 7004 is the one you’ll need to file an extension (though be sure to check for the appropriate one that matches your startup’s business type). Limited liability companies (LLCs) should ensure they select the correct form based on their specific tax classification. Once it’s properly filled out, it can be electronically filed with the IRS.

In addition to filing Form 7004, you’ll need to make sure that you’re paying the estimated tax that you expect to owe by the filing date to avoid any penalties. Estimated tax payments should also be considered to ensure compliance and minimize potential interest charges.

Common Mistakes to Avoid When Filing a Tax Extension

Filing taxes can be confusing, and filing an extension is no exception. If you don’t plan accordingly or don’t file on time, you can make a mistake that could cost you even more than the price of filing an extension. Here’s a look at some of the most common mistakes that startups make when filing a tax extension:

• Miscalculating the amount of taxes you owe when filing for an extension.
• Filing the wrong extension form based on your type of business.
• Missing the deadline altogether. The deadline is March 15 for partnerships and S-Corporations and April 15 for sole proprietors and C-Corporations.

What Happens If You Miss the Tax Extension Deadline?

Missing a tax extension deadline isn’t unlike missing any other type of deadline that involves your taxes—you’re going to be penalized.

The consequences of failing to file or pay on time are a late filing penalty that is 5 percent of unpaid taxes for each month (up to 25 percent), late payment penalties of 0.5 percent of unpaid taxes per month (up to 25 percent) and accrued interest on unpaid taxes from the original filing date.

Bottom line: Make sure you’re filing and paying on time!

Tax Payment vs. Filing an Extension: What’s the Difference?

Just because you’re filing for a payment extension doesn’t mean that you don’t have to pay your taxes by the tax deadline. A tax extension is just for filing – not for payment. Uncle Sam still wants his money, whether you’re filing an extension or not.

So what’s the difference between a tax payment and filing an extension? If you’re filing an extension, you still have to pay taxes by the original deadline, even though your tax filing may be granted an extension. Failure to pay still results in penalties, even if a filing extension is granted. Noting this, it’s important to calculate and pay tax estimates accordingly. Some tips to achieve this include:

• Keep accurate documentation. Consider using accounting software or working with a professional.
• Start tax planning well in advance of tax day.
• Know what forms you need for filing purposes.

How Graphite Financial Can Help with Tax Extensions

As professionals experienced in accounting and tax compliance, Graphite can help startups with all of their tax needs, including filing Form 7004 for extensions. Graphite has assisted hundreds of startups with their accounting and tax planning. Let a tax professional help you calculate your estimated taxes to avoid penalties and stay compliant with IRS regulations.

Stay Ahead with Tax Compliance

Proper planning is often the key to tax compliance, but if you need to file an extension to avoid penalty and reduce stress, consider partnering with an expert like Graphite to ensure accurate filings and peace of mind throughout the process.

Need Help Filing a Business Tax Extension?

We’ve already helped hundreds of startups—and we’re standing by and ready to assist you too. With accounting and tax services tailored to startups, we’re standing by and ready to support you with your tax needs. Contact us today for more information and to schedule a consultation.

FAQs

What is the difference between federal and state tax extensions?

Check with your state to check its requirements, but know that most states allow you to extend the time needed to file your state return while only requiring you to file for the federal extension. Personal income tax returns may also need separate extensions depending on state regulations.

Can I file an extension if I can’t pay my taxes?

An extension of time to file doesn’t mean that you can extend to pay. If you can’t pay your taxes, work with a professional accountant to explore other payment options. Some options may include a temporary delay or an installment agreement.

What happens if my extension is rejected?

If your extension was rejected, you can resubmit the request by April 20.

Are tax extensions free?

Everyone can file an extension for free, but it’s important to meet certain deadlines to ensure that you’re not filing late and penalized for the tardiness. Additionally, keep in mind that just because you’re filing an extension doesn’t mean that you don’t have to pay your taxes. The extension just gives you more time to submit your filing.

Can startups apply for multiple extensions?

Typically, you cannot ask for multiple tax extensions in the same year. Failure to file by the extension deadline is subject to penalty.