What Happens If You Pay Your Taxes Late?
Being the owner of a company is far different than being an employee of one. While many of us will start out as an employee somewhere, we all have the dream of one day creating something we get to call our own.
For anyone taking action on that dream, they’ll need to be prepared for all the responsibility that comes with it. Whether it’s your first year as an official entity or if you’ve been in your industry for a long time, paying your taxes on time will be a yearly battle for most companies.
Most businesses will keep track of their expenses throughout the year. Most of them will keep a keen eye on their income and revenue. However, very few will pay close attention to their taxes throughout the year. It’s very common for employees to wait until the last minute to file their taxes, but the stakes are raised for businesses that procrastinate too long.
In order to combat the fear surrounding tax season, it’s important to record and track your federal tax payments year-round. Whether you’re making quarterly or yearly payments, falling behind can be detrimental to the future of your company. That’s why it’s essential to have a professional on your team to keep you in good standing with the IRS.
What Happens If You Don’t Pay?
For most business owners, the deadline to file your taxes will be March 15th. For others, it will be the 15th of the third month of that business’ fiscal year. The IRS will distribute two different kinds of penalties when taxes aren’t handled properly on time.
The first one is a Failure to File Penalty, which will result in the business paying a 5% fee each month you file late. The IRS will cap this penalty at 25% of the total tax payment. For example, if your company owed $20,000 in taxes for the previous year and you haven’t filed yet, you’ll receive a $1,000 penalty each month you’re late until you reach a total of $5,000.
The other penalty is due to a Failure to Pay, which will incur a similar penalty structure. Instead of charging you 5% of the total tax payment, it’ll be a 0.5% fee. Using the example above, you’ll owe $100 each month. The catch is your penalty will still be accumulating until you reach that 25% threshold. Another thing to note is that you’ll be charged a fee every month for up to 50 months until you pay.
How Can You Avoid Late Payments?
It’s pretty clear that the failure to pay fee is much easier to work with than the failure to file option, but both can bring harm to your business. Ask yourself, do you really want an extra payment to worry about every month?
One of the easiest and most accurate ways of keeping your good standing with the IRS is by hiring a certified public accountant to join your team. They will take care of everything you need year-round, giving you more time to focus on your business.
If you’re ready to take control of tax season like you’ve never imagined, contact me today and let’s talk about your company’s future!
References
Kabbage. “What Are the Penalties for Paying My Business Taxes Late? – Kabbage Resource Center.” Kabbage Resource Center, Kabbage, 14 Jan. 2020, www.kabbage.com/resource-center/manage/penalties-paying-business-taxes-late.