1. Filing Form 7004 for Business Tax Return Extensions
2. Caution on Filing Late Returns
3. Penalties and Interest Charges

An LLC tax return extension due date may give you six additional months to file or make your business tax payment if you submit Form 7004. However, business owners must pay any estimated taxes by the original deadline to avoid interest and penalties on overdue tax payments.

Filing Form 7004 for Business Tax Return Extensions

Form 7004 is a pretty short form, and you only have to provide the following:

If you had a short tax year, indicate it on the form, along with your reason for having a short year.

Show what you estimate the total tax to be, although you don't have your return done yet. You'll have to do some calculations to figure what this amount will be. 

Show any credits and the total payments applied to your account and subtract this from the tentative (estimated) tax.

Lastly, show your balance due. You can pay using a business credit or debit card. You'll refer to the IRS chart for where to file your form, depending on your business's location and the return being filed. 

You can file for an extension online using tax preparation software, or a tax preparer can file online for you.

Caution on Filing Late Returns

Your business may be hit with interest charges and costly penalties if you do any of the following:

  • File your tax return late.
  • Underestimate taxes.
  • Fail to provide certain information by the deadline.

If your company has been an S corporation since it started, it typically will not owe any taxes. However, if it was a C corporation before becoming an S corporation, it might owe corporate-level taxes.

If your S corporation owes taxes and fails to pay by the due date, it may owe a penalty starting at 0.5 percent of the unpaid amount for every month it goes unpaid. This can go up to a max of 25 percent. If you fail to file your return or extend your due date by the deadline, you may owe a penalty starting at 5 percent of the unpaid tax amount going up to 25 percent.

In addition, if an S corporation doesn't file its return on time, it may be assessed additional penalties of $195 for each company shareholder per month for every month your return is late. This can go to a maximum of 12 months.

Penalties and Interest Charges

If you underpay your taxes or pay them late, the interest and penalties that the IRS assesses could add up to be higher than the original tax bill, and these additional charges include the following:

  • Interest on taxes you owe: Even if you have an extension for your due date, the IRS will still charge you interest on those taxes. Rates fluctuate and may be anywhere between 3 and 9 percent. Rates adjust each quarter.
  • Interest on penalties: You'll be charged interest on penalties for not filing a return, and this interest will be charged from the due date. Other penalties may be imposed for fraud, negligence, etc.
  • Penalties: The usual penalty for paying late is 0.5 percent of the unpaid tax for every month, or portion of the month, it's not paid. Penalties are in addition to the interest the IRS charges for late tax payments.

If you feel you have a valid reason for filing late, explain it in a statement and attach it with your tax return. You might avoid a penalty by doing this. Typically, the penalty can't amount to more than 25 percent of the amount you owe. If your return is more than two months late, the minimum amount you'll be charged is $135 or the amount you owe, whichever is less.

The IRS can impose stiff penalties and interest for late payments, so it's very important to meet all your tax obligations in a timely manner. You can always hire a tax professional or firm to take care of this aspect of your business for you. That way, you'll be able to focus on other parts of running your company without worrying about missing deadlines and being hit with hefty penalties as a result.

If you need help with an LLC and its tax requirements, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.