Penalties for Not Timely Filing Your Business Tax Return

taxation

Introduction

Filing your business tax return accurately and on time is not only a legal obligation but also a critical financial responsibility. Failure to meet the filing deadline can result in penalties, interest charges, and unnecessary stress. In this essay, we will explore the penalties associated with late filing and discuss strategies to mitigate them.

1. Failure-to-File Penalty (FTF Penalty)

The Failure-to-File penalty is the most common consequence of missing the tax return deadline. Here’s how it works:

Calculation: When you fail to submit your tax return by the due date (usually April 15th for most businesses), the penalty starts at 5% of the unpaid tax due with that return. It increases by 5% for each whole or part month that the return remains unfiled, up to a maximum of 25% of the tax due.

Interest: In addition to the penalty, interest accrues from the original due date of the tax on any unpaid balance. This means that the longer you delay filing, the more interest accumulates.

2. Minimum Penalty for Extremely Late Filings

If your return is more than 60 days late, there’s a minimum Failure-to-File penalty. The amount depends on the tax year:

For Taxes Paid in 2019: The minimum penalty is either $210 or 100% of the unpaid tax, whichever is lower.

The minimum penalty increases for subsequent years.

3. Solutions to Avoid or Reduce Penalties

a. File as Soon as Possible

The most straightforward solution is to file your tax return promptly. Even if you can’t pay the full amount, filing on time avoids the Failure-to-File penalty.
Consider using tax software or hiring a professional to ensure accurate and timely filing.

B. Request an Extension

If you need more time, request an extension before the original due date. Extensions typically give you an additional six months to file.
Remember that an extension only applies to filing the return, not paying the taxes owed. You’ll still need to estimate and pay any taxes due by the original deadline.

C. Pay Estimated Taxes

If you anticipate owing taxes, make estimated tax payments throughout the year. This helps reduce the amount due when you finally file your return.
Estimated tax payments are especially crucial for self-employed individuals and businesses with irregular income.

D. Set Up a Payment Plan

If you can’t pay the full amount, consider setting up a payment plan with the IRS. This allows you to pay in installments over time.
While interest and penalties may still apply, a payment plan can ease the financial burden.

e. Show Reasonable Cause

If you have a valid reason for not filing on time (such as illness, natural disaster, or other extenuating circumstances), you may qualify for penalty relief.
Reasonable cause may allow you to avoid or reduce penalties. Be prepared to provide documentation to support your case.

4. Conclusion

Filing your business tax return by the due date is essential to avoid penalties and interest. Take proactive steps to meet your obligations, and if you encounter challenges, explore the available solutions to minimize the financial impact. Remember that seeking professional advice can help you navigate the complexities of tax compliance effectively.

For more specific guidance related to your business, contact our Tax Group. Remember, timely filing not only saves you money but also ensures peace of mind during tax season.

Joshua M. Stahley

Chairman, CEO, & Managing Director of Legal Services

The Law Offices of Joshua M. Stahley, P.A

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