C Corp Extension: Everything You Need to Know
A C corp extension is on many business owners' minds when tax season comes around. 3 min read
C Corp Extension: Everything You Need to Know
A C corp extension is on many business owners' minds when tax season comes around. To obtain a C corp extension for taxes, business owners must timely complete and file IRS Form 7004.
Purpose of Form 7004
IRS Form 7004 is used by business tax filers, like C corps, to obtain extensions of time to file their taxes. The IRS grants Form 7004 C corp extension requests if they are timely, accurate, and accompanied by payment of taxes due. When these requirements are followed, many of the extension requests submitted on Form 7004 are eligible for automatic extensions of 5.5 to 6 months.
When to File Form 7004
In most cases, the deadline for filing a Form 7004 for C corp extension is the same as the original deadline for filing the tax return that the C corp is seeking an extension for. The exact date can be found on the form for the tax return the C corp is requesting the extension for.
Electronic vs. Hard Copy Filing of Form 7004
In most, but not all cases, IRS Form 7004 can be filed electronically. It cannot be filed electronically for Forms 8612, 8613, 8725, 8831, 8876, or 706-GS(D). Not sure if you can file electronically or need to file a paper copy? The IRS website has the information you need about electronic filing options for businesses.
If you file a hard copy of your Form 7004, it must be sent to your local IRS office. The address can be found on the form. You should be cautious if you file your extension request by paper but your return electronically. Your C corp tax return might be processed before your C corp extension request. If this happens, you might receive a penalty notice from the IRS.
Notification of C Corp Extension
The IRS provides notice of C corp extension denials but does not provide notifications of granted C corp extension requests. If you complete the Form 7004 correctly, your extension will be granted for the maximum extension term. The IRS retains the right to terminate the extension at any time upon 10 days written notice.
Important Tips for Obtaining Your C Corp Extension
Avoid common mistakes when filing for your C corp extension by following these tips:
• A separate IRS Form 7004 must be filed for each filing an extension is requested for, even if the requests are for the same C corp.
• You may round amounts off to the nearest full dollar amount but if you round one number, you must round all numbers on your IRS filing. Amounts ending in less than .50 should be rounded down, amounts ending in .50 or more should be rounded up.
• Form 7004 only extends the amount of time for filing your C corp returns. It does not extend the amount of time for paying your tax obligation to the IRS.
• Enter your name on IRS Form 7004 as it appeared on your tax filings from the previous year, even if your name has changed. Your extension may not be granted if your name does not match your name from your prior year filings.
• If you have a new address, you must also complete IRS Form 8822 to update your address with the IRS. Including your new address on your Form 7004 does not update your address in IRS records.
Paying Your C Corp Tax Obligation
Since Form 7004 does not extend your time for making tax payments, C corps must usually make their tax payments by the date on the filing they are seeking an extension for (even though the filing itself will not be submitted until later). Failure to pay on time can result in penalties. The usual penalty amount is 1% of the unpaid tax for each month unpaid up to 25% of the tax amount due.
It is possible, in some cases, to avoid the penalty. A penalty will not be assessed if you provide the IRS with “reasonable cause,” for the late payment. Do not provide explanations regarding “reasonable cause” unless and until the IRS provides you with a penalty notice. A penalty will not be assessed if you obtain an extension using Form 7004 and paid at least 90% of the tax owed on time and the remaining balance by the extension deadline.
In addition to penalties, interest is charged for late payment of tax obligations. Interest cannot be avoided by an extension or showing reasonable cause.
Help with Your C Corp Extension
If you need help with your C corp extension, you can post your legal need on UpCounsel’s marketplace. Upcounsel is a marketplace for top attorneys with an average of 14 years of experience. Attorneys on Upcounsel have experience working with, or on behalf of companies like Google, Menlo Ventures, and Airbnb.