Taxes are a major concern for any business because paying them on time keeps the IRS away. When it comes to filing or paying your taxes, there are deadlines that you need to adhere to. Ideally, you have to file your taxes before April 15 every year, though you can request an extension and get the deadline extended to October 15. Missing the deadline can get you into serious trouble as you may face a late fee or accrue interest as a penalty.
Still, there are chances that you may fail to meet the deadline due to unavoidable circumstances or avoidable reasons. But this should not mean the end of the world because you will definitely want to get your business out of trouble. Here is the best advice to follow if you have the problem of missed the tax deadline to deal with.
Go ahead and file anyway
Even if you have missed the last date of filing the taxes, you should still file them as soon as you can. In case you did not seek an extension but are owed a tax refund, there will be no penalties for filing late. On the other hand, you may have to face the failure-to-file penalty if you did not file for an extension but do owe money. The failure-to-pay penalty is charged at 5% of the total tax bill for each month which goes unpaid after the deadline. This amount can reach up to a maximum of 25% of the amount you owe. If you fail to pay the bill, it could have a negative impact on your credit score or even result in criminal prosecution at a later stage. The best advice, therefore, is to file even if you cannot pay.
Understand the repayment options
Once you miss the tax deadline and penalties pile up, repayment may become hard on your pocket. If you are not in a position to pay the entire amount upfront, you can seek alternative repayment options. The IRS offers short-term payment plans which give you the option to repay the total debt on the form of monthly payments, provided that you can pay off the amount due within 120 days. For a larger debt, you may seek a long-term payment plan that allows a longer period to pay off the debt and charges additional application fees.
Seek an Offer in Compromise
If you have missed tax filing because you are genuinely in financial trouble, these repayment options may not work. In fact, you may want some kind of relief from the IRS. The best approach in such a situation would be to seek help from tax attorneys who understand IRS settlements and can negotiate one on your behalf. They can convince the authorities to settle for an Offer in Compromise that allows you to pay less than what you actually owe. If the IRS thinks that you cannot pay anything at all right now, they may even delay the collection for some time until your financial condition improves. However, they will still charge interest until you pay in full. Moreover, the agency may also file a federal lien against your property and can seize and sell them to pay off the debt.
Do your homework
Tax cases are different and you cannot expect the same outcome for missed deadlines in any two situations. If you are able to show the authorities that you have a reasonable reason for not filing before the deadline, they may exempt you from penalties. For example, the IRS may offer relief if your business has been affected by a federally declared natural disaster. If you do miss your tax filing deadline, you should understand your situation and come up with the right strategy to handle it. The best way to do it is by consulting an IRS tax attorney with the right skills and experience.
Most importantly, you should take quick action to resolve the situation as soon as possible because missing the deadlines puts you on the wrong side of the tax laws. In fact, the sooner you do it, the better because it will give you more time for negotiating payment with the IRS. Moreover, it also means that you accumulate fewer penalties, which can make all the difference to your tax debt. Choosing the right professional to work out a feasible settlement with the IRS is also a good way to deal with the trouble. More than everything else, try sticking to the tax filing deadlines in the first place!