It’s time for those (sometimes) dreaded words: “It’s tax time.” Are you ready? There are plenty of jokes about paying taxes, but frankly, it’s no laughing matter. Meeting tax deadlines for a small business is serious business and lateness (or call it being “chronologically challenged”) shouldn’t be taken lightly. However, if your business is dealing with some financial challenges or some other issues causing a delay in tax payments, don’t panic. Your professional accounting service can work with the IRS to get you some relief.
What Can Happen if You File Late?
First, there is a difference between late filing and late (or non) payment. The deadline for paying business taxes in the U.S. is the 15th of the third month after the close of the business’ fiscal year. To avoid these penalties, it is important to both file and pay on time:
- Failure to file penalties are levied against a business that hasn’t filed taxes by the deadline. Penalties will be charged at 5% of the unpaid taxes for each month or part of a month that the tax return is late, up to 25% of the unpaid taxes. Interest also accrues on the unpaid taxes at a 3% rate.
- Failure to pay penalties (if you owe taxes) are assessed at 0.5% of your unpaid taxes, up to 25%, for each month that you don’t pay them.
Penalties for missing tax deadlines for filing or payment will cut into a business’s bottom line. In serious situations, the IRS can also place a lien on a business, seize assets, forfeit a refund and even file criminal charges.
What to do if You’re Not Ready to Files Taxes on Time
If some reason prevents on-time tax payment, it is important to at least file on time. If filing on time is not possible, don’t delay, simply arrange to get an extension. A short-term extension provides up to 120 days to pay. No fee will be charged but late payment penalties still apply. Every business qualifies automatically for an extension simply by asking for one. Do that early in the year to provide maximum time for filing and payment.
- Make partial payments to reduce the late payment penalties. If you file for an extension and pay at least 90% of what you owe, the IRS may waive penalties on the balance.
- Show the IRS reasonable cause for late payment. If a theft, natural disaster or records problem causes a delay, take that up with IRS representatives.
- Always negotiate your penalty by agreeing to pay the taxes owed as promptly as possible. (There is no “tried to negotiate” penalty.) Payments can be made by credit card. Payments can also be arranged by installment.
The IRS is willing to work with every business to pay off its tax debt. But the sooner that a business owner gets the IRS engaged in addressing the problem, the sooner and better that it will get resolved.
Tax payment options for missed tax deadlines range from short-term extensions to special agreements for businesses that are dealing with what can be termed “hardship” situations. A qualified tax professional will provide valuable assistance in dealing with these situations.
Get Expert Help with Tax Deadlines
If your business has difficulty with meeting tax deadlines, don’t go it alone. Call the experts at Doerhoff & Associates CPA, based in Jefferson City, MO for professional accounting, tax and financial assistance that will help you achieve the business success you are striving for. Superior service for small businesses.