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Late business tax filings can result in penalties and financial struggles for your business as you try to catch up.
Running a business comes with a lot of responsibilities, and one of the most important is staying on top of tax filings. However, life happens, and sometimes you may find yourself missing a deadline. If you’re facing late business tax filings, don’t panic! There are steps you can take to minimize penalties and ensure you’re back on track with the IRS.
File as Soon as Possible
The first thing to do when you realize you’ve missed the filing deadline is to submit your tax return. Even if you can’t pay the full amount due, filing your return as soon as possible will reduce the penalties. The IRS charges penalties for both failing to file and failing to pay, but the “failure-to-file” penalty is usually steeper than the “failure-to-pay” penalty. By filing promptly, you at least avoid the larger penalty for not filing.
Understand the Penalties Involved
There are generally two types of penalties for late tax filings:
- Failure-to-File Penalty: This penalty can be as high as 5% of the unpaid taxes for each month (or partial month) your return is late, up to a maximum of 25%.
- Failure-to-Pay Penalty: If you don’t pay your taxes on time, this penalty is typically 0.5% per month, increasing by 0.5% for each month you delay payment.
If you file late but pay some or all of your owed taxes, the penalties will be lower than if you do both.
Consider an Extension
If you miss the original deadline but know you need more time to file, you can apply for an extension. The IRS offers automatic extensions for businesses, giving you an additional six months to file. However, it’s important to note that an extension only gives you extra time to file your return, not to pay your taxes. If you owe money, it’s essential to pay what you can by the original deadline to avoid further penalties.
Request a Penalty Abatement
If this is your first time dealing with late business tax filings, you might be eligible for penalty relief. The IRS offers “first-time penalty abatement” for businesses that meet certain criteria, including a clean compliance history. You can request this abatement when filing your late return or by contacting the IRS directly. While it’s not guaranteed, many businesses have had success with this request, especially if they’ve been compliant in the past.
Set Up a Payment Plan
If you owe taxes but can’t pay the full amount, the IRS offers several payment options. Setting up an installment agreement can help you pay off your tax bill in smaller, more manageable amounts. This will help prevent additional penalties and interest from accruing. Be sure to keep up with the payments to avoid further issues.
Review Your Business’s Records and Stay Organized
One of the best ways to prevent late business tax filings is to stay organized year-round. Keep accurate records, track expenses, and be aware of important deadlines. By setting up reminders and making tax filing part of your business routine, you’ll avoid the stress of scrambling at the last minute and reduce the likelihood of late submissions.
Consult a Tax Professional
If you’re unsure about how to handle your late tax filings or need guidance on minimizing penalties, it’s always a good idea to consult with a tax professional. A tax advisor can help you navigate the filing process, negotiate with the IRS on your behalf, and provide strategic advice on how to reduce penalties and avoid future issues.
Trust the Professionals at the Harding Group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients.
Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning? We have the necessary expertise and years of proven results to help.
We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. Follow us on Facebook, Twitter, YouTube, and LinkedIn for more tax tips.