Tax season is on the way. While some eagerly await fat returns, others sit nervously waiting to hear just how much they owe. Small business owners generally find themselves in the latter category due to owing back taxes or past tax returns. Some businesses avoid paying taxes or fail to pay the total amount of tax owed because of financial difficulties. Here are a few of the most common concerns small businesses have regarding taxes.
Not Filing or Paying Taxes
Small businesses should always pay taxes. But situations can occur that make paying detrimental to businesses, and some owners elect not to pay or to avoid filing all together. If a business doesn’t pay or doesn’t file the business owner will not go to jail, but there will be penalties.
Beware the Statute of Limitations
The statute of limitations is generally three years, but doesn’t start until either the date you file the return or the due date of the return (whichever is later). What about ignoring the tax return all together? Even if you don’t file a tax return it will still show as due. Plus not filing a tax return could hamper your ability to claim a refund for an unfiled tax return. The statute of limitations can be advantageous if you made an error on a previous tax return. After the statute of limitation is over, you won’t have to worry about that particular year.
Failure to Pay Penalty
If your business does owe money to the IRS and you don’t pay, then there will be a penalty. The IRS usually charges a 5% penalty for the first five months that a business is late. Then interest is applied to back taxes, any interest owed, and on any other penalties which can exceed the amount of the back taxes.
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