About 19 million individuals and businesses filed for an extension on their tax returns last year, many due to unexpected circumstances such as IRS backlog delays. No matter the reason,only gives you more time to file, not to pay, which can put you at risk of overpayment, or hefty late payment fees if you underpay based on your estimation.
Because tax returns are the most common place where businesses report revenue and profit, they are crucial documents when a lender is determining whether or not to approve a business loan application.Many lenders simply will not move forward without a business’s most recent tax returns, but even if a lender is willing to underwrite based on older tax returns and financial statements, it may skew the financial picture you’re painting.
Additionally, lenders may view an extension as an issue of credibility, according to Samuel Fuentes, a bank executive with over seven years of experience in business lending. “If there is no urgency to file taxes, then some banks view this as the company trying to work the numbers to pay less taxes, or perhaps as irresponsibility with money management,” Fuentes said in an email.
“If a business owner has complex tax transactions or multiple businesses, it may take longer to gather documentation,” Halfaker said in an email. “It’s rarely a good idea to rush your taxes in order to get a loan through.”