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April 17 2012 is just around the corner and it is time to file my business and personal taxes. I have been too busy and now I am scrambling to get my business tax returns prepared and believe me it is driving me crazy. I think, I should just file an extension. And I will get ample time till October 17th to get my return filed. Thank god, I am a sole proprietor; else I would have to file the return by September 15th.

An estimated seventy eight percent of all small business owners are self-employed. The business taxes are tied to the personal tax returns for most of the small businesses that are not corporations. That means, most of the small business owners pay their personal income taxes on their share of business profits.

The tax extension 2012 request deadline is April 17th 2012 for filing Individual tax returns for 2011. You will be subject to penalties and interest if you do not send the estimated taxes you owe to the IRS by April 17, 2012. The individual and partnership business can apply for the tax extension till April 17, 2012, whereas for a Corporation the extension ended on March 15, 2012.

Wondering why this year’s tax extension due date is on April 17? April 15, 2012 falls on a Sunday and the next day is observed as the Emancipation Day and it is a holiday in the District of Columbia.

When you file for tax extension, you are given an additional 6 months by the IRS. During this extra time, you have to prepare and file your tax returns. You have to use the IRS Form 4868 if you are filing individual taxesr. The partnerships and corporations will have to fill out IRS Form 7004 while applying for tax extension. You can apply for your tax extension online or download the form from the IRS website and mail it.

An important point that you need to understand is that you do not get an extension for paying your tax bill. The extension is only for preparing and filing your tax returns. If you owe money to the IRS, either pay it online while you apply for extension online or include a check for the amount due when you are sending it via postal service.

Advantages of Filing an Extension Application

  • You get enough time to find more deductions - Many tax advisors advise small owners to apply for extension to take advantage of all possible deductions. It can be smart to file an extension because when filing your returns in a hurry, you are likely to miss some common deductions.
  • Gives you time to get a second opinion – Though you will have to pay two tax return preparers, it is always better to compare the opinions of two tax preparers. It will be easier for them to review your return after April 17th, when they have more time in their hand.
  • Reduces the chances of Audit – File the applicable forms by the due date and it will greatly decrease the likely hood of getting audited by the IRS.
  • No penalty – Don’t worry about receiving a penalty for filing an extension or being questioned by the IRS. You will receive a direct confirmation from the IRS that your request has been approved.

Along with merits there are also a few disadvantages when you file for an extension. You still have to pay your tax amount even if you file for an extension. That is you need to pay 90% of the tax due by April 17, 2012 to avoid the penalties for late payment. If you have to pay more than 10% later, you will be charged with a fine.  When there is a delay in filing your taxes, it will further delay your refund. Therefore, if you are expecting a refund, then it is always better to file your returns early. In case you later realize that you should be getting a large sum as a refund, you can always amend it.

Flickr image by MoneyBlogNewz

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