Wednesday, March 31, 2010

Business Owners Look to Extend Tax Time

All Americans know that filing a tax return is important, but for many business owners it is even more important to keep their business thriving. Therefore, some business owners like Sabina Gault of Los Angeles have decided to request a tax deadline extension in order to focus on operating her business. The Wall Street Journal wrote a great piece on some great reasons to file an extension, and the precautions to take when doing so. I have included a segment of their helpful article below.

At Sabina Gault's Los Angeles communications firm, Konnect PR Corp., the business day never ends. Ms. Gault and her staff of four regularly work nights, weekends—anytime—promoting the firm's 13 clients. With her mind so occupied, filing taxes for her company gets pushed to the end of her to-do list.

"Payroll and insurance and all of the legal bills—those go out every month," Ms. Galut says. "But with taxes…the next thing you know, it's April 10."

Recognizing she'd have to tackle a significant amount of paperwork before she could send Konnect's tax documents to her accountant, Ms. Gault decided to file for an extension. "We need to go through all expenses and it will take two or three weeks to get that together," Ms. Gault explains. The extension, which took less than two hours to file, will give Ms. Gault an additional six months.

Filing for an extension is a common way for business owners to buy some time during tax season. While extensions do not defer payment to a later date, they permit business owners to estimate what they owe and pay based on that estimate. Then, they can use the additional time to gather and organize all necessary paperwork for their actual tax return, which they file along with a check for the remainder of what they still owe—if their bill is more than they estimated.

Small business owners can receive an extension by filing IRS form 4868 for sole proprietorships or form 7004 for C-Corps, S-Corps and partnerships. These forms grant an automatic six-month extension for all entities except partnerships and corporations, which are granted a five-month extension.

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