When all of the other tasks and obligations of running a business begin to pile up, there are certain things that have a tendency to slip to the bottom of the priority pile. For some reason, filing and paying taxes is one of these things. Whether we do it consciously or unconsciously, filing taxes late can lead to issues down the road.
If you owe taxes and do not file a return on time, you will definitely incur penalties. How stiff those penalties are depends on how much you owe and how late you are. Even if you get an extension for filing or paying, the main reason why you should not be late on your taxes is to avoid penalties.
Is it better to wait until I can pay all that I owe?
Some people who owe taxes put off filing because they know they are not in a position to pay those taxes. They believe that waiting until they are ready to pay makes more sense, even if that means that they will incur some penalties.
The truth is, it is much better to file on time and pay what you can than to not file at all. The penalties for not filing are much higher than those for not being able to pay all that you owe at once.
What if it has been over 3 years since the original tax due date?
There is a statute of limitation within the IRS that says that after three years, you can no longer claim a tax refund for that year. People often hear that and think that it relieves them from the obligation to file a tax return for taxes over 3 years old. However, the IRS still requires you to file a tax return and if you owe taxes, you must still pay them.
What is the penalty for filing late?
You will be assessed a penalty of 5% of the balance due per month if you file your taxes after the deadline and did not get an extension. This failure to file penalty will be reduced by the amount you owe for failure to pay. You can pay as much as 25% of your unpaid taxes for filing late.
If you were able to file on time, but were not able to pay the full amount you owe by the deadline, they may assess a 0.5% penalty as well. This can also accumulate to up to 25% of back taxes.
Hacker Accounting can help you avoid these penalties by working with you to file your taxes on time and in an organized manner. You’ll never miss a deadline when we’re working for you. Call us at 602-375-5251 to learn more about how we can help you with your taxes.