While it is always best to pay all of your business taxes on time, or as soon as possible, businesses sometimes aren’t able to do so. However, the sooner you pay and the more you pay, the less you will owe in interest and penalties.
This article discusses when federal income taxes are due, how and when to pay, penalties for non-payment, and some payment alternatives.
Federal Income Tax Due Dates
The IRS sets tax return due dates for each business legal type. The filing date is also the payment date. The due date for small businesses filing their business taxes on Schedule C as part of their personal taxes is the same as the personal tax return due date of April 15. Partnership income tax returns are due the 15th day of the third month following the date when the tax year ends. For partnerships whose tax year ends on December 31, the due date is March 15 of the following year.
Corporate income tax returns are due the 15th day of the fourth month after the business tax year-end. For corporations with a December 31 tax year, the due date is April 15.2 S corporation income tax returns are due by the 15th day of the third month after the end of the tax year.
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For S corporations with a December 31 tax year, the due date is March 15.3 Due dates for limited liability company (LLC) returns depend on the number of members (owners): Single-member LLCs pay as sole proprietors on Schedule C, with a due date of April 15. Multiple-member LLCs pay as partnerships, with a typical due date of March 15. These due dates may change for a specific year.
If the due date is on a weekend or holiday, the due date is the next business day.
Penalties and Interest for Non-Payment
The IRS imposes both penalties and interest on taxpayers and businesses who don’t pay their taxes online or who fail to pay at all. Failure to Pay Penalties The IRS assesses “Failure to Pay” penalties for not paying taxes by the due date based on how long the overdue tax remains unpaid.
The IRS requires that taxes must be paid during the year, either by withholding from earnings or other payments or by paying quarterly estimated taxes. If a small business owner doesn’t pay enough during the year, they may be charged a penalty, even if they have a refund.
Corporations may be charged penalties if they don’t pay their estimated tax on time. Interest on Unpaid Taxes and Penalties Interest may be charged on penalties and the balance you owe for underpayment begins on the due date. If you receive a notice of underpayment, you won’t be charged interest on the amount shown if you pay in full on or before the “pay by” date. Interest rates may change quarterly depending on the formulas the IRS uses.
Interest on Underpayments and Penalties
Interest may be charged on penalties and the balance you owe for underpayment begins on the due date. If you receive a notice of underpayment you won’t be charged interest on the amount shown if you pay in full on or before the “pay by” date. Interest rates may change quarterly, depending on the formulas the IRS uses.
If Payment Still Isn’t Made
The IRS also has other more severe remedies for repayment of taxes. including tax liens and levies. A levy is a legal seizure of property to satisfy a tax debt. An example of a levy is taking money from a business owner’s bank account or other financial accounts. A tax lien is a public document filed with a court to alert creditors that the IRS has a legal right to property.
In both cases, the IRS assesses the liability and sends the taxpayer a Notice and Demand for payment. For liens, the IRS files a public document to alert creditors of the government’s right to the property.
The lien attaches to all of the taxpayer’s assets including business property. In addition to having your property seized, a tax lien is a public record and it can affect your credit report. Tax levies aren’t public and won’t affect the taxpayer’s credit report.
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