Federal income tax returns and payments for the 2021 fiscal year are due to the IRS on Monday, April 18, 2022.

If this deadline snuck up on you, you’re not alone. Luckily, the IRS makes it relatively painless to request an automatic filing extension for your federal income tax returns to October 18, 2022. 

In this article, we’ll go over the process for filing for an extension for your federal startup tax return, and review some frequently asked questions regarding the process.

TL;DR: Businesses can e-file Form 7004 by April 18, 2022 for an automatic 2021 federal income tax return extension, but must make estimated federal tax payments by the original April 18 filing deadline to avoid penalties.

For a flat annual fee, Zeni can manage your startup’s taxes. Learn more about Zeni’s full-service bookkeeping, accounting, CFO, and tax offerings—book a personalized demo today!

See also: 2022 Startup Taxes: A Complete Guide to Filing Small Business Tax Returns

How to request a federal income tax extension for your startup

The process to file a request for a federal income tax extension can be done electronically using Form 7004 (Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns).

Businesses seeking a federal income tax return extension can e-file Form 7004 by April 18, 2022 for a six-month filing extension to October 18, 2022. C-corporations must request an extension for Form 1120 (Form Code 12).

Important note: The extension only applies to the deadline to file your final federal income tax returns. Any payments due to the IRS must be estimated and made by April 18, 2022.

Additional details and instructions to e-file can be found on here the IRS.gov website. Businesses interested in requesting an extension by mail can follow instructions found here.

How can I track whether or not my extension is granted?

The IRS will only contact you if your request for an extension is denied. 

According to the IRS Form 7004 filing instructions, “The extension will be granted if you complete Form 7004 properly, make a proper estimate of the tax (if applicable), file Form 7004 by the due date of the return for which the extension is requested, and pay any tax that is due.”

What is my new federal tax return filing deadline if my extension is granted?

A federal income tax filing extension grants a six-month extension. The new deadline is October 18, 2022 for the 2021 fiscal year tax filing.

When is my business tax payment due if my extension is granted?

Form 7004 does not extend the time to pay any tax due, only the time to file the forms themselves. Businesses must pay the anticipated amount owed by the original federal income tax deadline of April 18, 2022. 

Does this also apply to my State tax filings?

No, Form 7004 is for federal income tax returns only and State guidelines for filing extensions vary.

Do I need to file a federal tax extension for my startup?

If you don’t have a tax plan in place for your startup or worry you may miss the April 18 business tax return deadline for any reason, you should consider filing for an extension. 

A few questions to ask yourself to determine whether or not you should file for an extension for your federal income tax return include:

Are my startup’s finances up-to-date and financial documentation organized?

If not, you could end up spending a lot of time on catch-up bookkeeping, working through your backlog of month-end closes, and compiling receipts and documentation for your business expenses. Filing an extension will allow you to hire a professional to do this for you, or buy you time to complete these tasks over a longer period of time.

At Zeni, we perform daily bookkeeping for our customers so their financial records are always up-to-date and ready for whatever might come their way—from audits and due diligence requests to fundraising prep and tax season, and any number of moments in between. Learn more with a personalized Zeni demo.

Is my startup planning to submit for an R&D Credit?

Businesses from a broad range of industries can apply for the federal R&D tax credit, including engineering, manufacturing, and software development companies. To apply, a business must fulfill two conditions:  

  1. It must have less than $5 million in gross receipts in the current tax year.
  2. It must not have gross receipts from more than five years before the current tax year.

If your business qualifies and you plan to submit for a startup R&D tax credit, you will need to identify qualifying business expenses, prepare calculations using Form 6765 (Credit for Increasing Research Activities), and organize and submit supporting documents to IRS to ensure audit readiness.

See also: Startup R&D Tax Credits: What You Need To Know

Let Zeni manage your startup’s taxes

It’s not too late. All companies enrolled in a Zeni Full Service, Pro, or Enterprise Plan can opt-in to a Zeni Tax Plan, starting at $2,499/year for annual startup tax filings for state, federal, and local taxes. 

Built for founders, by founders, Zeni gives startups an AI-powered finance team to automatically manage everything finance-related for their business — bookkeeping & accounting, invoicing, bill pay, yearly taxes, reporting, expense management, and more.

Available to Zeni customers only, Zeni Tax handles federal, state, and local tax returns — including the R&D Tax Credit when applicable — as well as year-round tax and compliance support for its customers for a low annual fee.

Interested in learning more? Sign up for a demo and discussion of how Zeni's startup finance professionals can make tax season a breeze for your company, and beyond tax season, how we can help manage every aspect of your company's finances with ease. 🕊

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