I missed the tax filing deadline. Now what?
This is a common dilemma that entrepreneurs face, especially during their first year of business ownership. Whether you purposefully avoided filing your taxes or you simply forgot to do them, there is still time to take action. Here are some tips for what to do if you missed tax day.
You can automatically get six months of extra time to prepare your taxes by filing IRS Form 4868. The failure-to-pay penalty is a lot lower than the failure-to-file penalty, so it is best to file now even if you cannot pay your tax debts in full. You will still owe interest on your tax debt regardless of the extension, but you will not incur a fee for failing to file. Simply put, this form keeps you in good standing with the IRS and gives you more time to prepare your taxes.
If you are new to business ownership, you may be overwhelmed with the process of filing self-employment tax returns. This is more time-consuming than filing a basic Form 1040 using your W-2’s from an employer. With that in mind, you can get through this if you read the instructions for each required tax form. These are available for free online through the IRS.
As an alternative, you can work with an accountant to file your taxes and manage your business finances as a whole. This will cost more money than doing the work on your own, but you might be able to save that money and more with tax exemptions. Find a knowledgeable small business accountant in your area that you can trust, and you can save yourself a lot of headaches later on.
Complete your taxes as soon as possible to avoid excessive fees on your tax bill.
If you cannot pay your tax bill upfront, talk to the IRS about a payment arrangement. The terms for this arrangement will depend on how much money you owe, how much you can afford to pay per month, how quickly you want to pay off the debt, etc. If you are still trying to get your business up and running, you can set up a low monthly payment now and increase it as your business grows. Ideally, you should pay off all of last year’s debt before the next tax season to keep your overall debt to a minimum.
Now that you know what goes into filing self-employment taxes, you can set yourself up for less stress next year. Keep all of your receipts for business-related expenses, and pay estimated taxes every quarter. Once again, the IRS has resources online for estimated tax payments to help business owners keep their costs low. If you make an installment payment each quarter, you will only have one quarter’s worth of tax bills to pay off on the next tax deadline.
If you don’t file your taxes at all, you could be arrested, fined or audited for tax evasion. The longer you wait, the more fees you are subject to and the more at-risk you put your business as a whole. If you cannot pay what you owe in taxes, don’t worry about it. At least get the return filed so you know what your debts are. Then you can make arrangements to get yourself back on track and prevent more fees from accruing.