Back in March, you were probably swamped and maybe feeling like you needed to organize those books a bit, so you filed for an extension on your taxes. Good move. You likely saved yourself some money by not guessing or being sloppy about what you submitted. But if you are a small business owner who filed for a tax extension, your deadline is fast approaching: September 15, 2018. While this extension may have brought you some relief, here are a few things to keep in mind to make sure you are staying on the good side of the IRS as the deadline approaches:
1. You should have paid any taxes for the 2017 fiscal year.
Any tax due to the IRS had to be paid by March 17 or your IRS extension will be invalidated. If you didn’t pay but should have, there is a late payment penalty of 0.5 percent per month, a 3 percent generated interest on all taxes owed, and a 5 percent late filing penalty if your extension isn’t validated.
Golden rule: In the future, even if you can’t pay the full amount, file anyway. There are more consequences and fees for those that fail to file than those who file and pay whatever they can.
2. You should be paying estimated taxes based on taxes due for the coming year.
In addition to that payment you owed the IRS for last year, you should be paying estimated taxes each quarter based on what you believe you will owe for this year. Be honest about how much you can pay, though. It’s much better to have under paid than to not pay at all. If you are under, you only have to pay interest for the remaining balance. Additionally, there are certain circumstances in which the late fee gets waived.
Because the IRS uses a pay-as-you-go system, there are quarterly deadlines for when taxes need to be paid. Below are the exact deadlines for 2018 and the months of revenue that fall within each:
April 17, 2018 (January, February, and March)
June 15, 2018 (April, May, and June)
September 15, 2018 (July, August, September)
January 15, 2019 (October, November, December)
3. If you intend to use the extension, you have to actually file by September 15.
The extension period will fly by before you know it so make sure you file before the extended deadline. If not, there will be additional fees and interest added to existing tax bills. If you miss the deadline yet manage to file within the 60 days of the extension deadline, there will be a 5 percent penalty on all unpaid taxes, on top of interest, each month. However, the total penalty rate is capped at 25 percent for all taxes.
If you wait longer than 60 days after the deadline to finally file, the penalty is either $210 or 100 percent of the unpaid tax, whichever is less. Most importantly, there is no way to apply for a second extension, so file your taxes by the final deadline of September 15 to avoid the really steep penalties.
4. While you may have helped yourself with securing the extension, don’t wait until September 14 to think about it.
Most tax worries come from being unprepared and unorganized. If you haven’t done so already, start working to get your bookkeeping in order so you’re ready to file on (or before) the deadline. Use the extra time to make sure you have all documents and forms, and above all, are confident in what you are filing.
Still struggling to figure out how you will get that tax filing together by the extended deadline? Bookkeeping Express can help. We’ll take the weight of taxes — or tax extensions — off your shoulders. Get in touch and we’ll take a look at your books for free.