There are many reasons to file a business tax extension, but one of the best is that it gives you time to review expenses and optimize your tax savings. The process is easy, and business owners often use the extra time to maximize tax benefits. This is how to file a business tax extension for your 2021 taxes.
What are the deadlines for a business tax extension?
For 2022, the deadlines are as follows:
- Business tax deadline is March 25, 2022
- The business tax extension deadline is October 17, 2022.
- You can submit your tax extension form online via IRS e-file providers or by mail.
How do I file for a business tax extension?
There is no penalty for requesting a deadline, but you must complete an extension form for the IRS. The form you complete depends on the type of business you have.
If you are a sole proprietor filing a schedule C, then you will submit a 4868 form. If you are a corporation, then you must submit a 7004 form.
Remember: an extension of time to file your tax return is not an extension of the time you have to pay (if you owe taxes). You should estimate how much tax you think you owe and then send the estimated payment in with your extension. You can get a refund later if you overpay, but you’re likely to incur penalties or interest if you don’t pay anything.
Common deductions to consider
Once you have filed your business tax extension form, you can begin looking for more ways to maximize your tax advantage. Many valuable write-offs are missed in the rush to file in spring, so use the extra time to investigate common deductions like the following:
COVID-19 tax relief
The impact of COVID-19 is still affecting small business finances, and the IRS continues to offer tax relief, although many programs have expired. You can find current, COVID-related tax options in this IRS guide.
Many businesses benefit from refundable tax credits against employment taxes with the Employee Retention Credit. Others may find allowable deductions with paid leave for workers and tax credits for businesses with fewer than 500 employees.
With a business tax extension, you have more time to research these deductions, but it can still be complicated. If you feel overwhelmed, find a good accountant.
Travel-related expenses
Business owners consistently underutilize this deduction, which covers expenses like airfare, accommodations, and transportation-related costs such as rental cars, taxis, trains, tolls, and more.
Travel expenses are 100% deductible, unlike meals and entertainment costs, which are limited to a 50% deduction. Analyze your travel from the past year and note any instances where you met with a client or vendor, had a business meeting, toured a facility, met with your board or shareholders, held a conference, etc.
Auto deductions
If you use a vehicle for any business-related activities, you can list those expenses on your tax return. There are two main ways to calculate this deduction: mileage or actual expenses.
Most business owners choose the mileage method, which comes to 58.5 cents per business mile.
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Dining and entertainment
All those dinners, lunches, and morning coffee meetings add up to a healthy deduction—especially if you spent the time discussing business with a partner, potential client, vendor, or strategic ally.
Business owners are entitled to the full deduction in all of those scenarios so be honest about your actual expenses and underestimate.
Office supplies and technology
The majority of your office supplies and technology purchases can be fully expensed, whether you’re upgrading your phone, buying computers, or ordering iPads for everyone. Due to COVID-19, this now includes sanitation/cleaning supplies and home office equipment for employees.
Keep every receipt and list every expense so you receive your maximum tax benefits.
Other business deductions
Remember that you may be entitled to many more tax advantages than you know. Business owners frequently miss opportunities for additional deductions because they don’t understand all that’s available to them or they’re worried about an audit.
If you keep accurate records, there is no reason not to list the full amount of all your business expenses. Even if the IRS disagrees, the worst they can do is disallow it.
Make tax time easier
PaySimple knows you don’t have hours to waste on accounting, so we make easy for you to see your business’s financial progress in real time. With PaySimple, you can integrate your payment solution directly to QuickBooks so your tax filing process is efficient every year. Feel prepared come tax time, with accurate and up-to-date records that help make filing business taxes easier than ever! To get started with PaySimple, sign up for a free trial!
