What Will Happen if Your Small Business Doesn’t File Taxes?
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- Milica Rosoka & Erez Davidov
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Almost all of us are required by law to file and pay taxes. Internal Revenue Service (IRS) agents are constantly on the watch for people who attempt to pay less than is necessary or completely avoid paying at all.
Late filers of business taxes are also pursued by the IRS. The penalties can be severe, so it’s crucial to maintain proper records throughout the year and be aware of the regulations that apply to your firm specifically. And pay your taxes on time to avoid financial fines and, in certain extreme cases, legal action.
Here are some suggestions to stay out of problems. All because the IRS considers small business tax evasion to be a severe felony.
What Is the Maximum Income a Small Business Can Earn Before They File Taxes?
The amount you must pay depends on how your company is categorized. Your tax rate will be a flat 21 percent if your company is a C corporation. You’ll be subject to taxation on every dollar you make after accounting for credits and deductions. You would prepare separate tax returns for your business and yourself in this scenario.
Business Tax Responsibilities
Most firms will have a tax year that runs from January to December. But you can ask the IRS for a special exemption so that your tax year instead covers a slightly modified 12-month period.
The organizational structure of your business will affect the federal, state, and local taxes you have to pay. You should review the tax resources offered by your state and municipal governments because state and local taxes can differ.
There is a useful tool provided by the U.S. Small Business Administration for researching tax responsibilities by state. The most prevalent taxes at the state and local levels are income and employment taxes. Income is the money your business earns. State employment taxes, which vary on your state and cover many items, will apply to you if you hire employees. The federal government levies five different kinds of corporate taxes:
- Income
- Self-Employment
- Estimated
- Employer
- Excise
Know your tax obligations in advance because you may need to pay some of them during the year.
The Deadlines for Filing Small Business Taxes
Tax Day often falls on April 15, and for some small company owners, you will submit your individual and business tax forms by this date. Tax Day can be moved about a little bit because the IRS doesn’t want it to coincide with a weekend or legal holiday. Because April 15 comes on a Saturday in 2023, Tax Day will fall on Monday, April 17.
However, because some business classifications differ from the April 15 date, your tax filing deadline relies on your company’s classification. For example, S companies and partnerships normally have a filing deadline of the 15th day of the third month after the end of the tax year.
These companies will naturally follow the calendar year, thus their taxes are due on March 15. The deadline for filing taxes for sole proprietors and all corporations other than S corporations is typically the 15th day of the fourth month after the end of the tax year. Again, most of these firms adhere to the calendar year, but other organizations do so as well (July to June).
Regardless of how your company is classified, it will be much simpler for you to file your taxes at the end of the tax year if you (or your accountant) can accurately calculate your quarterly estimated taxes throughout the year.
Consequences of Companies Failing to File or Pay Taxes
Which leads to the question, “What happens if you don’t file taxes?” The penalties for failing to file business taxes on time (or at all) can range from monetary fines to criminal charges, which may result in jail time. To file them and file them on time is the short solution, so say it.
Nearly a dozen distinct sorts of penalties are available from the IRS. All range from failure to include the proper information on your return to preparer misbehavior to simply forgetting to file a return or failing to pay the amount owing. Once more, this is the reason you should engage a pro to submit your taxes accurately. These consequences frequently involve financial fines, and it’s crucial to understand that interest will accrue on such penalties. Make sure to pay any penalties you receive as soon as possible. If you disagree with the amount of the penalty, the IRS does allow you to contest it. Additionally, if you acted honestly and could demonstrate a good explanation for your inability to pay your taxes, the IRS may erase or lessen the penalty.
How Can You Make Business Tax Payments?
The IRS provides several options for tax payment:
- Checking account
- Utilizing a credit card, debit card, or e-wallet (PayPal)
- With the use of the Electronic Federal Tax Payment System (EFTPS)
- Cash
- Electronic withdrawal of funds (when e-filing)
The IRS provides payment plans, an Offer in Compromise, and temporary collection delays for people who are having financial difficulties and are unable to pay their full tax obligation within a given tax month.
Reduce Your Small Business’s Tax Liability by Working With Experts
Your time is valuable, and taxes are complicated. Work with a Your Part Time Accountant tax professional to make sure your taxes are submitted accurately and on time if you aren’t a tax specialist.
Our small business tax accountants will assist you through the nuances of your federal, state, and local tax requirements based on the unique circumstances of your firm. Schedule your free tax advice appointment right away since we promise to maximize savings!