Filing Small Business Tax Returns Late – What You Need to Know
There is no better way to stay ahead of the IRS than to pay your taxes on time. It is advisable to start filing your returns even before the financial year ends. This gives you more time to prepare and to accurately include everything to be taxed.
However, sometimes life happens. You may find yourself trying to file your tax returns at the last minute and hoping you finish on time. It happens. Sometimes you just forget about it all together then remember when it is too late.
Tips for filing tax returns
To avoid filing late, you should plan ahead. Note every expense and income down every day for the full year. This comes in handy when filing time come. Rather than going through all your documents again, you should have a nice summary of your income.
Whether this is your first year to pay taxes or you are used to it, you should start early. The deadline is almost. April 15th is the last day to file your taxes, so if you haven’t, you still have some time to do so.
First, understand the various tax forms from the IRS. Get the forms that are made for the type of business you run.
Classify your expenses and income well. Don’t ignore any expenses or small incomes you got during the financial year. Have a good record of everything that happened at your business in that year. You can decide to file the tax returns yourself or hire a professional to help you whichever is easier.
For anybody who feels like the deadline is closing in too fast, you can file for an extension. First, you need to understand that even when you are given the extension, it is for filing and not for paying. That means that the extended period is to be used to file your tax returns fully. All payments, on the other hand, should be paid before the set date.
If you are unable to pay your tax returns on time, you may face some fines and penalties from the IRS. So as you ask for an extension, you should first estimate how much you owe in taxes then send it to the IRS as they give you more time to continue filing the tax returns.
Once you realize you might miss the deadline, it is advisable to file for an extension before April 15th. This gives you more time up to October to properly and accurately file your tax return. For someone who feels like they did not accurately file their tax returns, they can also ask for an extension. This comes in handy in case you had missed some deductions, credits or other details while filing the first time.
Penalties for filing late
These penalties can be harsh. The IRS imposes a penalty for every amount that is unpaid after the deadline which is April 15th or the extended period. You are expected to pay an additional 5% for every amount of tax you haven’t paid after every month following the deadline. The only advantage is that the penalties cannot go over 25% of the tax you owe.
However if you can show a reasonable proof of why you failed to file your taxes, the IRS can waive this penalty. Such cases can include illness or some unseen calamities.
Penalties for paying late
The penalty for not paying your taxes on time is a charge of 0.5% on all that you owe for every month after the deadline. The penalties are limited to a maximum of 25% just like the penalties for not filing taxes.
It is therefore, advisable to file your taxes even if you are not able to pay them. It is better to deal with the 0.5% penalty for not paying than the 5% for not filing. Interest is also charged for every amount that is unpaid. The rates are determined by the IRS.
If you feel like you will not be able to file your taxes in time, it is also advisable to pay about 90% of what your taxes may be. If after the extension you find out that you had paid more than 90% of your taxes, the IRS might decide not to impose the usual penalties on you. You may walk away without paying the 5% penalties.
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