How to File a Tax Extension in 2025 (What Small Business Owners Need to Know)

Tax deadlines are approaching fast. Many business owners and individuals find themselves scrambling to finalize paperwork, complete bookkeeping, or gather missing tax documents. If that sounds like you, filing a tax extension might be the best option. 

In this guide, we will cover:

• What a tax extension is and how it works
• Key deadlines and IRS forms you need to know
• How to properly file an extension to avoid penalties
• Common mistakes that can cost you thousands

What Are Tax Extensions?

A tax extension gives you additional time to file your return, but it does not extend the time to pay any taxes owed.

The IRS and state tax agencies set specific deadlines for both business and personal tax filings. In some cases, these deadlines are the same, but they often differ.

There are many reasons why you may need more time to file your return:

• You are still waiting on important tax documents, such as 1099s, K-1s, or W-2s
• Your bookkeeping is not yet complete
• You provided your accountant with information too late
• You want extra time to review your tax return and ensure accuracy

If you cannot file your return by the original due date, filing an extension formally requests additional time. However, an extension only applies to filing your return. If you owe taxes, your payment is still due on the original tax deadline.

Some states automatically accept the federal extension, while others require a separate extension request. Be sure to check with your state tax agency to confirm your requirements.

Is Filing a Tax Extension a Bad Idea?

Many business owners believe that filing an extension increases their audit risk. This is not true.

Filing an extension can sometimes reduce the chances of an audit by allowing you more time to ensure accuracy. You can also request an IRS transcript to verify that all tax documents reported under your Social Security number or business tax ID match IRS records before filing your return.

Filing an extension allows you to avoid rushing, which helps prevent errors that could otherwise raise red flags with the IRS.

Key Points About Extensions

• You must file your extension request before the deadline
• An extension only provides more time to file, not more time to pay taxes owed
• If you expect to owe taxes, submitting an estimated payment with your extension can reduce penalties and interest
• If you successfully file an extension, your tax return must be filed by the extended due date

Tax Extension Deadlines for 2025

Business Tax Extensions

• S Corporations and Partnerships
  
  
• Original deadline: March 15, 2025
• Extension form: Form 7004
• Extended due date: September 15, 2025
• C Corporations
  
  
• Original deadline: April 15, 2025
• Extension form: Form 7004
• Extended due date: October 15, 2025

Personal Tax Extensions

• Individuals, Sole Proprietors, and Single-Member LLCs
• Original deadline: April 15, 2025
• Extension form: Form 4868
• Extended due date: October 15, 2025

What Happens If You Do Not File an Extension?

Failing to file an extension and missing the tax deadline can result in significant penalties.

• S Corporations and Partnerships: $210 per month per owner
• C Corporations: 5 percent of unpaid taxes per month, up to 25 percent
• Personal Returns: 5 percent of unpaid taxes per month, up to 25 percent

In addition to these penalties, late tax payments will accrue interest and additional fines.

What If You Cannot Pay Your Taxes?

If you owe taxes and cannot pay the full amount by the deadline, you still need to file your return or extension on time. The penalties for late filing are significantly worse than those for late payment.

If you are unable to pay in full, consider these options:

• Making a partial payment with your extension request to reduce interest charges
• Setting up an installment agreement with the IRS
• Exploring temporary relief options, such as an offer in compromise, if you are facing financial hardship

Recap

In short, filing a tax extension is a simple way to buy yourself more time to file your return accurately without rushing or making costly mistakes. It doesn’t delay your tax payment deadline, so if you owe taxes, you still need to pay by the original due date to avoid penalties and interest. Submitting your extension on time is crucial; missing both the filing deadline and the extension can lead to unnecessary fines. 

For a full breakdown on how to do it right, listen to my latest podcast episode.