Many therapy practice owners fail to file a tax extension because they’re worried it will negatively impact their businesses. Others, having filed an extension, believe they have extra time to pay their taxes or that they don’t need to meet other filing requirements.

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Here are the seven most common tax extension myths that get private practice owners into trouble.

Myth #1: The IRS must approve a tax extension

The IRS automatically approves any request for a tax extension.

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This applies whether:

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• You file Form 4868 for your sole proprietorship
• You file Form 7004 for your S corporation

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There are no extra steps to go through to qualify for approval. Once you submit the relevant form, you will be given an extra six months from your original deadline to file.

Myth #2: An extension to file is also an extension to pay

When your business is approved for a tax filing extension, the due dates for tax payment do not change.

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• Your total amount owing is due on your tax filing deadline. If you file quarterly, the Q4 payment deadline remains January 15th (or the next business day).
• There is no way to extend the payment deadline with the IRS. Once the deadline passes, you will accrue late payment penalties on the total amount of tax owed. (Check out Extension vs. Late Filing: What’s the Difference? for a breakdown of penalties.)
• If you aren’t able to pay your taxes, you can work with the IRS to set up a payment plan that reduces the amount they charge in penalties.

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Myth #3: Filing for an extension increases the risk of an audit

Filing for a tax extension does not increase the likelihood that you will be audited, or put you under any additional IRS scrutiny.

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On the other hand, failure to file or pay your taxes may increase IRS scrutiny and the likelihood of an audit.

Myth #5: Filing for an extension puts you on a watchlist 

Each year, about 5.5 million businesses file tax extensions with the IRS. If the tax authority kept a list of every business that filed for an extension, it would be a very long list. 

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The IRS lacks the resources to devote special attention to every business that requests an extension. What’s more, filing for a tax extension is common practice among small- to medium-sized businesses. 

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Numerous factors may make it a challenge for your practice to file on time. But these are a part of running your business. It’s the reason the IRS makes extensions an option, and the reason so many businesses take advantage of them.

Myth #6: A federal tax extension also extends state tax deadlines

Many states have the same filing and extension deadlines as the IRS. And many of them automatically qualify you for an extension if you request one from the IRS.

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But “many” is the operative word here. Some states have different deadlines, or require you to file a different form to request an extension at the state level.

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So, if you’re planning to file a federal tax extension, visit your state tax agency’s website to find their process and rules for extensions. Assuming your IRS extension automatically qualifies you for an extension at the state level could lead to penalties.

Myth #7: A tax extension makes quarterly filing unnecessary

Filing a tax extension gives you more time to complete your annual return, but it does not eliminate the need to file and pay your quarterly taxes.

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If your business is required to make quarterly tax payments, plan to continue estimating and paying the amount you owe each quarter. Failure to do so will result in penalties. And missing just one quarterly payment can throw off your financial admin for the rest of the year.

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Learn What Therapists Need to Know About Tax Extensions.

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post. ‍

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‍Bryce Warnes is a West Coast writer specializing in small business finances.

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