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Pay Business Taxes on Time—Even If You File for an Extension

Posted by Elise Fajen to Taxes

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We talk a lot about tax deductions and credits on this blog—from home offices to bonuses to charitable tax deductions, there are so many ways to help our clients save on taxes! So it can be easy to forget that so many small businesses overpay each year just because they miss their tax deadlines.

Never miss a deadline when you use this guide to build your own 2017 tax calendar.

 

The IRS really wants you to file and pay your taxes on time and the penalties for not doing so can quickly add up:

1. Late payment penalty:

Typically ½ of 1% of your unpaid taxes, per month


2. Interest on taxes owed:

The federal short-term rate plus 3% with interest compounding daily


3. Late filing penalty: 

Usually 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty starts accruing the day after the tax filing due date and will not exceed 25% of your unpaid taxes. 

Not all of these penalties are the same. For most businesses, the late filing penalty is the big one. Fortunately, the IRS allows businesses and individuals to file for an extension. This gives you an extra six months to get your books in order, work with a CPA to claim all the tax deductions and credits available to you, and file your taxes.

 

That’s great news! But guess what?

 

The tax filing extension is NOT a tax payment extension

Your deadline for paying and filing (or filing for an extension) is determined by your entity type and your fiscal year and cannot be extended. Use this chart to see when your taxes must be paid.

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By all means file for an extension. But also pay your taxes by the original deadline to avoid the late payment penalty and interest on taxes owed.

 

You may be asking yourself, “How do I know how much taxes I owe if I/my CPA hasn’t filed my forms?” 

 

Estimate. And pay what you can. Even if you’re under, you will only pay interest on the remaining balance, and, in certain cases, you may avoid the late payment penalty. But even if you can only pay a small fraction of the amount you owe, you’ll be demonstrating your good intentions.
business taxes

About the author
“Elise

Elise Fajen

After founding Wind-Blox in her freshman year of college, Elise has an obsession with all things entrepreneurial. She's an alumna of George Fox University and lover of all things covered in glitter. Get in touch with Elise today at elise.fajen@indinero.com or (503) 388- 3546.

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