Taxes are a complicated and confusing thing. The tax code is as incomprehensible a thing as there ever was. In fact, it is so large that there is nobody who fully understands it. This is why many small business owners get into tax trouble because they aren’t even aware that they did things wrong or that they trusted an accountant who thought that they had understood.
With all that said, it is extremely important to make sure to pay on time. There are tax deadlines that you need to stick to and make sure that you have everything in order to not be penalized, or worse. In this article, we will go over several of the reasons to pay your small business taxes on time.
You’ll Be Penalized
There is an important distinction to make when it comes to the tax deadline. Everybody needs to file their paper or E-file IRS 1099 Form by April 15. There is an extension that can be sent by that date, but that’s just for submitting the paperwork. You still have to pay by the due date.
If the IRS doesn’t receive your payment by the due date then you will start accumulating penalties. That also includes the interest on the payment in addition to the actual penalty. In fact, you could end up paying ten times what the original tax payment was supposed to be by missing the deadline.
The more time that passes, the higher the amount you will end up having to pay on top of what the original payment was supposed to be. Knowing this, if it’s a question of not having all of the money for the payment, it is a good idea to pay what you can and file on time. Then, send in the rest when you can to avoid the penalty growing.
You’ll Forfeit a Refund
There are times when you think you owe money when in reality you will be getting a refund. If you don’t file on time then you won’t be eligible for the refund. If you do file late but not overly late then there is a chance you will still qualify. However, the longer you wait to file the lower your chances of getting a full refund.
You Could Miss out on Benefits
When you don’t file then that is going to be income that is not counted when it comes to your social security. When it comes time to retire then you will be leaving money on the table since you didn’t report that income. Maybe it isn’t a lot of money, however, anything that doesn’t get reported is less money for you.
Try to remember that the self employment taxes for Medicare and Social Security are only on your profits so you won’t be overpaying for those benefits. Any business-related deductions will lower your burden for paying for your entitlements. You’ll still get full credit toward your benefits when you remember to file.