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February 5, 20262 min read

Filing a Business Tax Extension: It Buys Time to File, Not Pay

Education: Stop them from getting hit with "Failure to Pay" penalties. Positions you as the "Protector."

Jason Astwood
Jason Astwood
Fractional CFO & Tax Strategist
Key Takeaways
  • Filing a Business Tax Extension: It Buys Time to File, Not Pay
  • The Penalty Trap
  • Why File an Extension?

Filing a Business Tax Extension: It Buys Time to File, Not Pay

One of the most common misconceptions during tax season is that a tax extension gives you more time to pay your taxes. It doesn't.

An extension (Form 7004 for businesses) only grants you more time to file your paperwork. The IRS still expects you to pay your estimated tax liability by the original deadline (March 16 for S-Corps/Partnerships, April 15 for C-Corps).

The Penalty Trap

If you file an extension but don't pay your estimated tax, the IRS will hit you with a "Failure to Pay" penalty.

  • **The Cost:** 0.5% of the unpaid taxes for *each month* or part of a month the tax remains unpaid, up to 25%.
  • **Interest:** Plus, you will be charged interest on the underpayment (currently hovering around 7-8%).

Why File an Extension?

If you shouldn't delay payment, why file an extension at all?

1. Accuracy: It allows you to ensure all 1099s, K-1s, and expense categorizations are correct without rushing.

2. Avoid "Failure to File": This is the big one. The penalty for *not filing at all* is significantly higher—5% per month—than the penalty for not paying (0.5%).

3. Retirement Contributions: It gives you more time to fund certain retirement plans (like a SEP IRA or Solo 401k) for the previous tax year.

The Strategy

Don’t let the calendar win.

1. File the Extension: Protect yourself from the 5% "Failure to File" penalty.

2. Estimate & Pay: Work with us to calculate a "safe harbor" payment by March 16. Send that money to the IRS.

3. File When Ready: Finalize your return in May or June when your books are perfect.

File the extension to protect your record, but pay the estimate to protect your cash flow.

Jason Astwood

About the Author

Jason Astwood, Fractional CFO & Tax Strategist

As an IRS Enrolled Agent* and Financial Services Certified Professional®, Jason is a trusted authority in taxation, financial strategy, and business growth. He is the author of The S-Corp Playbook and the Director of Union National Tax, bringing over two decades of expertise in proactive tax planning, financial management, and compliance. Jason specializes in helping business owners minimize tax liability, optimize cash flow, and build long-term financial success. His combined expertise as a tax strategist, financial advisor, and Fractional CFO empowers entrepreneurs to scale their businesses with confidence.