By Joyce M. Rosenberg, AP Business Writer
NEW YORK (AP) — With April 15 not far off, many small business owners will get six-month extensions of the deadline to file their income tax returns. This year, the procrastinators have company as the economy makes tax issues more complicated for everyone.
Changes in the tax laws due to economic stimulus efforts mean some owners need more time to gather information and complete their returns. And Edward Smith, a partner with the accounting firm BDO Seidman in Boston, noted that many companies have smaller staffs this year, so getting the 2009 books closed, a necessary step in the tax filing process, has taken longer.
"It doesn't leave a lot of time to do returns," Smith said.
Some owners routinely get an extension because it gives them more flexibility in funding certain retirement plans. This year, many others with cash flow problems will get extensions in the hope they'll have the cash to make plan contributions before the new deadline of Oct. 15 comes around.
Here's a short guide to getting an extension for filing your tax return:
THE MOST IMPORTANT THING YOU NEED TO KNOW
Getting an extension doesn't let you off the hook for paying your taxes by April 15. As the IRS says on its Web site, www.irs.gov, "an extension of time to file is NOT an extension of time to pay."
The government requires taxpayers filing for an extension to make a good-faith estimate of how much tax they owe and to pay that amount by April 15. If they don't, they'll have to pay late payment penalties and interest on their unpaid taxes.
Many owners are in the predicament of not only being unable to file their return, but also not having enough money to pay their taxes.
They should go ahead and file for an extension, make an estimate and pay whatever they can. They also might want to apply for an installment agreement with the IRS.
The IRS does have an option for owners who are in extremely difficult circumstances. They can file form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship. The form requires you to "provide a detailed explanation of the undue hardship that will result if you pay the tax on or before the due date." A general statement of hardship won't do.
You'll also need to give the IRS a statement of your assets and liabilities and an itemized list of your income and expenses for the past three months.