If your business is new, not had a great year or you’re struggling with other issues in your life, paying your business taxes in full and on time, may not be possible. However, failure to do so will almost always result in hefty penalties and fines.
If you’re worried about paying your business income tax, why not reach out to an accountancy firm who can give you the most up to date and sound advice? Until then, here’s a brief guide to business income tax to get you started:
When are federal income taxes due?
Depending upon the type of business you’re running, the IRS have a series of tax return due dates for each legal business type, and the date of filing, is also the date of payment.
Small businesses must file and pay their business taxes on Schedule C as part of their personal taxes, on the same due date as personal tax returns: April 15th.
For partnership income tax returns, these are due on the 15th day of the third month following the date when the tax year ends.
Income tax returns for corporations are due on the 15th day of the fourth month following on from the business tax year-end.
S corporations must file and pay their income tax returns by the 15th day of the third month after the end of the tax year.
For Limited Liability Companies, or LLCs, due dates for returns are dependent upon the number of members (owners):
- Single member LLCs – must pay as sole proprietors on Schedule C, on April 15th
- Multiple member LLCs – must pay as partnerships, on March 15th.
Note that these dates may change, and if the date the payment is due falls on a weekend or holiday, the next business day becomes the due date.
What are the penalties and interest for non-payment?
There are penalties imposed by the IRS upon taxpayers and businesses who fail to pay their taxes at all, or on time, and these are explained in more detail below:
- Failure to Pay penalties – these are given out based upon the amount of time the overdue tax is unpaid for, and must be paid during the year, either by withholding from earnings or other payments or by paying quarterly estimated taxes.
Should a small business owner not pay enough during the year, they may face a penalty, even if they have a refund, and corporations may find themselves facing penalties if they don’t pay their estimated tax in a timely manner.
- Interest on unpaid taxes and penalties – the IRS can charge interest on penalties, and the outstanding balance for underpayment starts on the due date.
If, as a business owner, you receive a notice of underpayment, provided you pay in full on or before the ‘pay by’ date, you won’t be charged interest.
Other types of penalties
For violating other business taxes, the following penalties may be issued:
- Failure to file if your tax return is late
- Accuracy-related penalties for non-claiming of full income, or for taking non-permissible deductions or credits
- Failure to file an information return in a timely manner
Interest charged on underpayments and penalties
Beginning on the due date, interest may be charged by the IRS on penalties and the balance owed for underpayment, and if you receive a notice of underpayment, you won’t be faced with interest charges if you pay the amount in full on or before the ‘pay by’ date.
To ensure that you never face penalties from the IRS for late or inaccurate filing or payment, work with an accounting company who specialize in small business accounting.