Tax filing deadlines are declared by IRS well in advance. One might have hired the best accountant, who worked day in and day out, but because of countless reasons many people fail to keep up with them. Once the deadlines are over the conditions of filing change significantly, it will invite penalties, interest, and other forms of loss, which can be depressing. But there is always a way to minimize the losses.
To maintain your incomes and business in the fine conditions even after missing out on the tax filing within deadlines, here is what happens and what you can do about it:
Pay Quickly and Prepare for Penalties
You miss the tax deadlines and the penalties are inevitable. And there are several of them – failure to file, failure to pay, underpayment, etc. These penalties depend on the pending amount and the time that you take to file and pay the taxes. So if you are unable to pay the complete amount, pay as much as you can. The payable penalty amount will be:
|Failure to File Penalty||5% of Owed Balance / Delayed Month
|Failure to Pay Penalty||0.5% of Underpaid Tax / Delayed Month|
|Underpayment Fee||Variable as per Balance Owed|
As these penalties depend on the months for which the tax filing and payment has been delayed, it is better to get going with the pending tax work immediately and do not forget to count in the penalty correctly. Filing the right amount including the penalties will ensure there are no further penalties.
Consider Reasons That Caused Delays
For certain reasons that caused the delay with tax filing, you can avoid or minimize the penalties. For example, you could be waiting for some tax documents, depending on which you have to calculate the final payable amount. In such cases, you can file the default or previous year amount of that particular document. When the documents arrive, you can file the updated return. There can be several other reasons that may be causing the delays and inviting penalties for you.
So, lookout for a solution on those reasons and wrap the task ASAP. For a genuine solution in such cases, it is best to consult an experienced accounting professional. And try to be quick while deciding on whether you need an accountant or not.
You can Request an Extension
Finance can be in the shoddy condition at times and one may not be able to pay the taxes then. By requesting a tax extension, you can get more time to pay your taxes, but you will still have to file them in time. The extension will allow you to pay the amount in October if accepted. Outdated information, misspelling, switched numbers, etc. can make the IRS reject the extension request. You will be notified if the request is rejected over an email or a letter. So, check them regularly. Once rejected, you will have around a week to fix the errors and apply with the request again.
Since taxes are certain, it is better to file them early and ease your task. However, some inevitable circumstances or negligence can invite delays, which is definitely a bright sign. But once the deadlines past, there is no need to press the panic, button. One should remain calm and look for the best available solutions.
Most of the experienced accounting professionals with a better understanding of your business will be able to provide a sound advice as they have been serving numerous such cases since years, but opting for a novice accountant can be a risky situation and any further error might invite more penalties.