Yes, we’re in the midst of tax filing season and everyone is either scrambling to get all of their paperwork together to get it turned in and their returns filed on time, while others are slowly going through their faded receipts, typing everything in their spreadsheets, and gathering their bank and credit card statements for someone else to go through to put together since that’s what they do every year. But the upside is yes there’s always the opportunity for getting that 6-month extension, however,
#1 it’s not automatic, you must physically file it and verify with your tax preparer it’s been done
#2 if you owe taxes, you will still accumulate interest and penalties to pay on top of those taxes and the extension doesn’t exempt you from getting them
Below is a few examples of the interest rates and penalties for those who end up owing taxes and either hadn’t paid them on time by the end of the year or from filing an extension with.
- Filing a late Form 1120S tax return, each shareholder listed could be fined a late filing penalty of $195.00 per month for each month or part of the month the return is late, up to 12 months.
- Filing a late Form 1065 tax return, each shareholder listed could be fined a late filing penalty of $195 per month for each month or part of the month the return is late, up to 12 months.
- Filing a late Form 1120 tax return with an outstanding tax debt, the corporation will be charged a monthly late-filing penalty of 5% of the outstanding tax up to 5 months or when the return is more than 60 days late, the minimum penalty is the smaller of the tax due or $135
- Interest is accrued indefinitely until the tax debt has been paid. The interest rate is determined quarterly and is the federal short-term rate plus 3%, and the interest compounds daily.
- The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full.
Again, these are just a few highlights of filing late for businesses and potentially taxes, not to mention the penalties and interest for personal tax returns which follow a different set of guidelines. Judge Lynn Toler who hosts Divorce Court often will refer to the “stupid tax” people pay with regards to what they waste their money on by breaking things, throwing away their loved ones’ treasures, etc. This is what business owners do when they don’t bother to review and manage their financials to ensure their tax returns are filed on time. They could end up paying the stupid tax.
Dwayne J. Briscoe
For More Tax Blogs or QuickBooks Training Information