Startup Tax - How To DIY Company Tax Extension 2020
Thinking about filing your corporate tax return and need more time? You are in luck! Here is a step by step guide on how to DIY the extension form for corporate tax returns.
This extension will give you until October 15th, 2020 to send the IRS the tax forms. Currently, the IRS has a huge backlog for processing tax returns but they are bringing their workforce back to the office as much as they can. If you have a tax refund, it might take a while for you to receive it. Here are the instructions on how to file the extension form and make the payment.
First, download the extension form here from the official IRS website. (See screenshot of the form below.)
Now fill out the extension form with the information below:
Company name
Employer Identification Number (EIN)
Company address
Part I, box 1 - Form code:
For all the C-corporations, the form code to enter here is 12.
Part II, box 6 - Tentative total tax:
This is an estimation of the tax amount you need to submit to IRS.
The estimated tax amount = Net Income * 21%
Often companies pay a little more than the estimated tax amount while filing an extension. The reason is the tax amount owed to the IRS might change when you finalize the return. If you pay a little bit more now and IRS owes you money, they will refund it to you, so no loss; if you owe the IRS money when you are finalizing your tax return on Oct 15th, 2020, you will need to pay interest on the difference. As a result, it is better to pay a little bit more now to avoid any unnecessary future interest payments.
Be aware: you are only extending the time to file the return forms, NOT the tax payment. This extension form grants you more time and lets you file tax returns on October 15th, 2020, but you still have to make a tax payment NOW. Otherwise you will pay penalties and interest on the unpaid tax.
Make the payment:
EFTPS: You can make the payment online via EFTPS website.
Now that you have the 1 page form filled, you are ready to send it to the IRS. You have two options:
- File it by mail:
There are several different locations for mailing in the extension, depending on the state you are in. To look up the correct IRS location for your state, check here.
- File it electronically:
Most tax software will let you file the extension form online.
Confirmation:
The IRS will NOT send any confirmation on this extension. Assume that your return now is extended.
A CPA’s 2 cents:
The reason for filing this extension is that the IRS wants you to communicate with them promptly and let them know that you need more time. No matter what you have decided to do, the rule here is to follow the IRS’s guidance and let them know your intentions. So be sure to follow the steps above, fill out the extension form, make an estimated tax payment NOW (if you owe taxes), and send the form to IRS so they know that you need extra time.
