Date: April 13, 2022
Tax Deadline is Approaching– Are You Running Late?
If you feel like you are behind filing your taxes this year, you are not alone – with the extensions allowed during COVID the last couple of years, many feel they are running late without that benefit this year. In fact, the latest IRS statistics show that last year as of April 1st, 93 million people had filed their returns, compared to only 91 million this year. As the deadline for filing quickly approaches (falling on April 18th this year), what can you do to ensure that you do not file late and incur unnecessary and costly penalties and interest?
If you just can’t get things together by the deadline, that’s okay – but file an extension and try to pay the the tax you think you’ll owe when you file your extension. The good news is that you can file an extension pretty easily these days, most tax preparation software will allow you to file them for free in a matter of minutes. You can also check the IRS website for free filing options. Keep in mind that you will have to file the request for an extension by April 18th, or you could get a ‘failure to file’ penalty, which adds up quickly. Filing an extension gives you an extra six months (until October 17th), generally until October 15th but if it falls on a weekend, you get until the following Monday. You should also note that getting an extension does NOT give you an extension on paying what you owe the IRS – they still expect you to make a payment. If you don’t they will send you a love letter in the future once you’ve moved on and forgotten all about last year’s (or 3 years ago) taxes, it’s a future headache waiting to haunt you. You will also want to check with your state regarding extensions as they are not always the same as your federal filing.
The penalties for not filing and paying can be rough – no one wants to get stuck owing the IRS. The amount depends on how late the return is, and the amount of unpaid taxes. The penalty rate is 5% of the unpaid taxes for EACH MONTH that the filing is late (it is capped at 25%). The ‘Failure to pay’ penalty is .5% of the unpaid tax amount (also capped at 25%). Estimated payments are a source of frustration for many business owners. It’s best to have a professional in your corner to help take the guesswork out. The best way to stay ahead of the game is by having a Tax Plan in place year-round. This helps make sure that you are not overpaying and can save you thousands of dollars, and even reduce or eliminate your tax bill. We also strongly suggest that you pay a professional to do your tax preparation – you really do get what you pay for, it is better to pay a professional to do it right and find your savings and help protect you from audits. Every year thousands of business owners overpay in taxes because they tried to do it themselves or found the cheapest option available to file their taxes. If you use this approach you’re very likely to pay a lot more than you have to each year.
If you don’t have a professional in your corner, we would be happy to help you. Don’t get caught in the trap of putting your taxes off and then finding the cheapest solution at the last moment. We love helping our clients save thousands so that they can reinvest into their businesses and themselves. If you would like to talk to an expert to see potential areas where you might be overpaying, click here to speak with one of our tax strategists. If you need help and want some help filing an extension before the due date, we can help.