How to File a Business Tax Extension With The IRS

In 2006, the United States Internal Revenue Service amended its policy to simplify the extension filing procedures for businesses seeking to file after the formal tax filing deadline for annual tax forms (irs.gov). The extension allows businesses to postpone formal filing for up to 6 months from the last possible filing date for businesses.

To qualify for an extension of filing, all a business need do is complete an IRS form 7004. IRS form 7004 is not the only type of extension form, as tax payments deferral requires additional documentation, such as via IRS form 1138. Furthermore, in regard to employee retirement plan reporting, a separate IRS form 5558 is required for extension up to 2.5 months.

• Form 7004: Extension for filing tax documentation with the IRS 

• Form 1138: Extension for business payment of taxes 

• Form 5558: Extension for filing employee plan distributions

Filed IRS Forms 7004 grant either 5 month or 6 month filing extensions, depending on the type of business. Partnerships, Estates and Trusts may only qualify for the 5 month extension, while a host of other business types may qualify for the 6 month extension. When filing for an extension, the only completed form that needs to be sent to the Internal Revenue Service is the form 7004. According to the IRS, taxes due from a business, and/or interest on tax due is still incurred, whether it be retroactively or otherwise, regardless of the tax filing extension. As stated above, the payment of said taxes may be deferred by using IRS form 1138.

Steps for filing an extension with the IRS

To illustrate how a business would go about filing for an extension with the IRS, the following steps may be helpful. Since tax filing involves a lot of financial records, obtaining quarterly reports, financial statements, and tax deductions such as contributions to retirement plans and other tax deductible items, an extension may be required to properly gather, record and submit tax documentation. On IRS form 7004, no reason is needed for filing the extension. The services of an accountant, tax specialist or tax attorney may be beneficial in some situations.

Step 1: Gather relevant tax documents, ex-financial statements, withholdings, and retirement plan contributions

Step 2: Place all pertinent documentation and forms into a folder and/or computer file for later use

Step 3: Identify business structure: ex-sole proprietorship, C-Corporation, LLC etc.

Step 4: Acquire and complete IRS form 7004, then mail to appropriate IRS tax service center.

Step 5: Calculate probable tax due and/or potential interest payments on the deferred tax filing.

Step 6: Submit form 7004 and/or any other necessary tax filing extension forms. Send payments and any relevant payment deferral forms to the IRS.

Since companies often have different tax situations, bookkeeping systems and other financial recordkeeping, it is important to identify what can be deducted from company income to ensure the business doesn't overpay taxes. Doing so may take time, hence the need for the extension. Tax filing extensions may be needed for a number of purposes.

Summary

Filing for a business tax filing extension with the United States Internal Revenue Service is fairly simple in comparison to the actual filing of annual tax documents. Essentially, all that is needed is a form 7004, however, depending on the businesses situation, other forms may also be needed such as forms 1138 and 5558. When in doubt, contacting the U.S. Internal Revenue Service businesses or corporate division may be helpful. 

IRS tax centers are located throughout the country and can be located through the linked map. Additional assistance from tax specialists, tax accountants and/or attorneys may be necessary in some situations. Keeping paperwork, financial records and bookkeeping systems organized can be helpful in the time following an extension as ultimately, tax filing should be accurately reported. This article has illustrated ways businesses can file for tax filing extension with the U.S. Internal Revenue Service by pointing out paperwork requirements, in addition to steps that may be involved when filing for extension.

Sources:

1. http://www.irs.gov/newsroom/article/0,id=154554,00.html
2. http://www.irs.gov/pub/irs-pdf/f1138.pdf http://www.irs.gov/pub/irs-pdf/f5558.pdf
3. http://www.irs.gov/pub/irs-pdf/f7004.pdf
4. http://www.irs.gov/pub/irs-pdf/i7004.pdf
5. http://www.irs.gov/formspubs/article/0,id=98155,00.html

The pros and cons of filing taxes electronically

Taxes can be filed electronically either through a tax preparation software or directly via the online version of tax software producers or accounting service providers. Electronic filing of taxes has been an official method and accepted by the U.S. Internal Revenue Service since 1986 (irs.gov). There are many advantages to both Government and tax filers when tax information is filed electronically.

The Internal Revenue Service Restructuring and Reform Act of 1998 was enacted as law for the purpose(s) of modernizing and streamlining the tax authority's operations in addition to assisting tax payers with their tax preparation and making adjustments to other tax filing rules. However, even with the many advantages, there are also some disadvantages of electronic tax filing that may sometimes by overlooked. This article will discuss the pros and cons of filing taxes electronically.

Pros of electronic tax filing

The number of tax filers who have used electronic tax filing has increased steadily for several years. This is due to the pros of electronic tax filing in addition to the U.S. Department of the Treasury's administrative goal of making the tax filing process digital. For the government, a predominantly digital tax filing process saves the government money in data entry expenses and shifts responsibility of finding errors to the tax preparation software, and individual tax filer. The tax filer pros of filing taxes electronically are listed below:

• Faster refund: Refund processing time may take as little as 2 weeks
• Efficient: Recording and transmitting of tax information is faster
• Less paperwork: Paper tax forms such as form 1040 do not need to be mailed
• Digital copy: Digital copies can be stored on a computer or disk
• No mailing costs: Transmitting of data itself is included in the service
• Can transfer federal information on to State tax application
• Math check and guided completion aids in tax filing accuracy
• Reduces need for expensive "anticipated refund loans"
• Online payment of taxes via multiple methods

Con of electronic tax filing

• Not always free: For high income earners and State tax returns a fee may be charged
• Will owe taxes faster if tax is due: If a tax filer owes taxes, the more efficient method could lead to faster processing of official acknowledgement of owed taxes.
• May not accommodate some complex tax filing procedures: 2% of tax forms and/or procedures cannot currently be accommodated by electronic tax filing.
• No paper copy unless one is printed: Paper copies may be desirable in some cases
• Personal information transferred through a third party: When intermediary services are used, their database may store personal tax information.
• Increased risk of computer identity theft: Stored tax information may exist on 1) personal storage devices, 2) a financial services firm and 3) the tax authority.
• Computers may inaccessible by some segments of the population

Disadvantages of electronic tax filing are sometimes overlooked in the interest of acquiring a faster tax return. Some of the cons of digital tax filing may be minor as data encryption become more advanced and there may always be people who are either located to remotely to have internet access or do not have access to a computer. Despite these cons of electronic filing, the availability of electronic tax filing is useful if not beneficial to many tax filers for the reasons illustrated in this article.

The U.S. Department of the Treasury has actively promoted electronic tax filing for several reasons which include 1) reducing costs 2) modernizing the tax processing system and 3) reducing paper requirements of the IRS. The number of electronic tax filings have become a major form of tax filing in recent years and are likely to continue as such in the future if past tax filing statistics trends remain strong indicators.

Source(s):

1. http://www.irs.gov/efile/article/0,id=120353,00.html
2. http://www.treas.gov/press/releases/rr1915.htm
3. http://www.irs.gov/newsroom/article/0,id=170407,00.html
4. http://www.pmstax.com/gen/bull9808.shtml

How to File Taxes Online

Filing taxes online does not always require one to buy online tax filing software. Some companies allow the filer to utilize an online website that is connected to their own databases. In a nutshell, filing taxes online involves transferring tax information to the Internal Revenue Service (IRS) just like the paper filing method.

An important difference between the two methods is that digitally transferring tax information to the IRS is electronic and done via the internet. Both federal and state taxes can be filed online.

To file the taxes online can be done in more than one way i.e. either directly on to the tax filing software application or on paper first and then onto the software. The online method may not necessarily be faster during the submission phase, but is often processed faster once it is uploaded. E-filing can really be as easy as 1,2,3 and 4 if one chooses to follow the steps listed below:

(1) Obtain all the paperwork first to avoid frustration half way through the filing process. W-2's, 1099 interest statements, receipts, banking information etc. are a few of the documents that are often needed.

(2) If one is a perfectionist consider filling out a paper tax return first then transferring the data onto the electronic return for good measure. This may be helpful when filling out schedule D's and itemized deductions, and when researching which tax forms are needed.

(3) Enter information into the software and sign the electronic tax return.

(4) Submit the tax return through the E-filer to the IRS. The software does all the adding up practically guaranteeing all the numbers entered will add up or the software will point out it needs to be corrected before it can be submitted. 

Online tax filing tips and benefits 

Filing taxes online can have several benefits, but being familiar with the process can help make the benefits more realizable. The first time one files taxes online may be a little slower than sub-sequent tax filings due to the learning curve and acclimation with the process. Online E-filing sites often have software that simplifies the process by asking questions required by the IRS so one doesn't have to figure out what is needed.

Visiting the IRS website and the E-filing website and taking some time to review and understand them may help avoid obstacles later in the process. For example, the signature at the end of the E-filing might take some E-filers by surprise if they don't have the necessary information to sign electronically.

• Faster return: Returns can be processed and in your bank account within 2 weeks.

• Accurate: The mathematical ability of the software double checks for math errors.

• Reputable: Mortgage companies, auditors and banks all prefer tax filers who go through tax preparation

• Inexpensive: Filing federal taxes online can sometimes be free depending on one's financial situation and which company is used.

Some online filers require a fee around $35.00 for State tax filings. There are several filing plans out there so be sure to shop around first. A list of companies that work with the U.S. Internal Revenue Service (IRS) can be found at the IRS website by clicking on the e-file link and following the instructions. is quite helpful in informing a potential e-filer about the process. The site reviews commonly asked questions, tax related questions about e-filing, and recommends e-filing programs. Two reputable online tax filing services are the following:

(i) H&R Block: This is a pretty good service. The tax return is encrypted, professional and doesn't always require the tax filer to buy software because it can be filed on their online application. The return begins processing as soon as the math check is complete and the forms submitted. A lot of the data from the federal return may be automatically transferred to the state return for you.

(ii) Turbo Tax: Turbo Tax has been around for a while and has a well developed software program that can allow one to start entering available information at home whenever they want. This can help one get a head start on fine tuning the tax return before being sent to the IRS.

Summary

Filing taxes online is an alternative to paper filing. In the process of e-filing tax information is gathered and transferred using an online or pre-purchased tax software. The data is checked for accuracy by the software and is then sent to the IRS for processing. There are several benefits and venues available with E-filing taxes.

Keep in mind an electronic signature is needed at the end of the process. This may be the previous year's Adjusted Gross Income, or a pin code obtained via the IRS. A list of e-filing websites can also be found at the IRS website along with information and instructions about the e-filing process.