Now that 2023 has begun bringing joy, celebration, parties, and a new tax season, the fact that small businesses may suffer with their tax filing process is unequivocal. And so, small business owners need to understand the importance of filing taxes and how long they can go without doing so. Of course, running a small business is complex and often overwhelming when trying to keep up with taxes. But many small business owners are surprised to learn how long their business can go without filing taxes. While there could be financial repercussions like interest and penalties, the minimum time a small business has to file its taxes will depend on the structure of the company, its location, and, most importantly, revenue.
Without all this information, it can be difficult for a business owner to decide whether they should file taxes sooner or later – which is why delving into this topic is an important starting point for any small business owner who wants to understand their options better. So, without further ado, let's begin and learn more about how long a small business can go without filing taxes. Explore below.
The Internal Revenue Service expects all businesses to complete and submit a federal tax return annually. Absolute zero allowances or exceptions will allow you to skip this process.
However, they understand that unforeseen events can sometimes wrench everyone's plans. A medical emergency, the passing of a loved one, a natural disaster – any of these can have far-reaching financial consequences that may lead business owners behind in meeting their obligations. The IRS won't come knocking at your door for missing the tax filing deadline this year, but you could start seeing fees for failing to pay or failing to file.
This being said, how long can a small business go without filing taxes?
In most cases, a small business with no employees and has filed income tax returns in the past must file its annual return within three years of the original due date.
The IRS considers this the "normal" period, so if your company falls under this category, you could wait up to three years before filing your taxes.
For businesses with employees, the IRS gives a little more leniency — you only need to file within four and one-half years of the original due date.
This means that if you have employees, you have an extra year and a half to get your taxes in order before facing possible penalties from the IRS.
The downside of waiting to file your taxes is that you'll miss out on potential deductions, tax credits, and other benefits associated with filing promptly. And, if you think you can go without filing forever – that won't be the case either. The IRS has no statute of limitations for collecting unpaid taxes and can come after you at any time.
The consequences of not filing taxes vary depending on the situation.
- If you simply forget to file your taxes or fail because of a cash flow issue, you may get away with paying a late filing fee and interest.
- If you fail to file your taxes for multiple years – or if the IRS suspects fraud or tax evasion – you may be subject to criminal investigation and penalties.
- If the IRS suspects that you have not filed your taxes for several years, they will eventually contact you. Unfortunately, this could lead to serious financial consequences such as fines, penalties, garnished wages, liens on property, and even imprisonment in extreme cases.
Failing to file taxes on time is a gamble that very few businesses can afford since the IRS is often quick to react with hefty penalties.
- 5% of unpaid monthly taxes after the initial missed deadline for failure to file.
- 0.5% unpaid taxes per month after the initial missed deadline for failure to pay.
Missing the deadline for filing taxes can be costly - especially if it leads to a failure-to-pay penalty.
- If your tax returns and liability remain unpaid, the IRS will enforce a max penalty of 5% (charged per month) until 25% of your total tax due has been paid.
- This could extend up to 45 months, after which the penalty stops at 125% of the original amount.
To limit your fees, you must submit your tax forms and associated payments as soon as possible; that 10x increase in payment penalties is an unnecessary financial burden!
Filing promptly is key if you don't want to face IRS penalties.
Although the IRS offers leniency to business owners who take the initiative to file their taxes late, be aware that if you have intentionally underreported your income or were otherwise negligent, the IRS can impose additional fees of up to 40 percent of the amount due. Moreover, discrepancies such as underreporting income can trigger an audit pretty quickly – even accidental ones.
Remember, there is no statute of limitations on back taxes, so it's in your best interest to get your taxes filed and paid as soon as possible so that you remain in good financial standing with the IRS. They seek compliance from business owners and provide several avenues for them to do this. This may begin by:
- Receiving a letter by U.S. mail from the IRS. Remember that IRS always communicates through the mail. The email does not give threatening messages by phone or email - these are tax scams trying to take advantage of you.
- The mail will ask you to contact them to get your reorders in order.
- If you fail to revert them, or by chance, prefer ignoring them, the IRS will escalate by sending more mail in concern to notices, letters, and warnings.
- In the worst cases, you may soon find that your assets may be seized, and accounts may be levied straight from your bank account.
So it is best recommended that you take a proactive stance- don't wait for the IRS to escalate; get your affairs in order so you do not have further financial stress added down the line.
It is notable that for many unfortunate business owners, the hard truth about past due taxes comes in the form of a stern notification from the IRS about potential fees. However, keeping up with tax deadlines can help small businesses succeed without unexpected costs and financial penalties from 'Uncle Sam.'
Struggling with back taxes can be intimidating. If you're receiving notices of unpaid taxes, do not hesitate to reach out to a tax professional like an enrolled agent, CPA, or lawyer for guidance. Their expertise and experience could prove invaluable throughout the process. Plus, they can assist with obtaining a reasonable payment plan and staying on top of tax deductions that reduce your overall debt. Investing in a good tax resolution service ensures you are getting the most out of your financial investment and relieving your stress surrounding back taxes altogether.
Notably, it's very important to be wary of any company or individual claiming they can "fight the IRS" on your behalf to make unpaid debts disappear. These fraudulent operations take advantage of people in dire circumstances by offering a false promise of quick debt resolution. Your best bet is to seek the help of a professional tax expert, or if you have the knowledge and skills, try to sort out back taxes yourself.
By following efficient and reliable procedures, as suggested below, you can resolve these matters properly and restore financial stability for yourself or your business.
Act quickly to handle your taxes - the longer you ignore the IRS, the more relentlessly they will pursue you.
Get organized with your finances and documents to figure out how much you owe each year.
When your bookkeeping is done, get your tax forms filed immediately, even if you can't afford to pay the taxes - this stops failure-to-file fees from piling up.
Get your tax and filing fees paid off promptly so you can get back into the IRS's good books, then move forward confidently.
Take some time to prepare for your future tax filings; use bookkeeping systems or outsource the job to an experienced specialist who can ensure everything is filed correctly, on time, every time.
Having a full understanding of what you owe can help ensure that your liability amount is accurate. In addition, it's the smart thing to do when dealing with unpaid taxes.
For any tax filer facing a heftier tax bill than expected, there are several IRS tax relief programs to lighten the load. Through its Fresh Start initiative, taxpayers can take advantage of four ways to pay off what they owe. They are:
An installment agreement makes it simple and convenient to pay your taxes through smaller payments spread out over time. Whether you need a quick fix or a longer-term plan, there's an option available. What's more, you can even choose to go with a direct debit, so you don't have to worry about missing or forgetting payment deadlines! So get relief from the financial burden and sign up for an instalment agreement today—get back to your finances on a stable path.
If you're dealing with back taxes, an offer in compromise may be a good solution for you. This entails making a counteroffer to the IRS, who has recently stated that you must pay them "A" amount - offering instead to pay them a lesser dollar value in a single payment. Though this option can be advantageous, it's significant to realize that it comes with stringent conditions and is not feasible for most people and businesses needing tax help. If this method appeals to your situation, contact an Enrolled Agent or tax resolution provider to assist you when entering into negotiations.
Facing tax debt can be a daunting experience. If the IRS declares your debt "Currently Non-Collectible," you have some breathing room. This does not mean that your taxes are forgiven; however, it does delay the collection process until you are financially stable. Even if it might seem like a setback, this gives you time to get back on solid standing with the government so that when you can pay off what is due, it will be done easily and stress-free.
Penalty abatement erases all those bothersome additional charges if you can demonstrate that there were reasonable causes that prevented you from submitting on time. This is great news for those unable to pay taxes because of economic hardships, legal problems, or long-term illness. If any of these circumstances can be validated, penalty abatement can help remove the burden and free up funds for other needs. So even if it seems like all hope is lost when tax season rolls around, don't forget about this potential relief!
Understanding that it can be difficult and intimidating to offset a large sum of money, Fresh Start has made it easier for people all across America to remain in good standing with their taxes. In addition, these programs provide debt relief options for those unable to pay the taxes they owe immediately or who need a way to make their tax payments more manageable over time. You can also consider taking out a loan or using a credit card to pay back taxes as long as you have the means and are able to do so.
The IRS takes several steps to collect unpaid taxes. It takes responsibility for what you owe, be aware of all available options for paying off your debt, and don't be afraid to reach out for professional assistance if necessary. Some of the ways the IRS collected unpaid taxes are:
The IRS uses notices and letters to demand payment of unpaid taxes and inform taxpayers about changes in their accounts.
CP2000 is an automated notice used by the Internal Revenue Service (IRS) to inform taxpayers that they may owe additional taxes. It compares information reported on tax returns with income and payments reported to them by employers, banks, and other third-party sources. The CP2000 notice specifies any discrepancies between the two figures and potential penalties for failure to pay on time. It also allows taxpayers to dispute any discrepancies by submitting documents and/or explanations supporting their claims. This notice is typically sent out when the taxpayer appears to owe additional taxes and has not responded to earlier notices. Therefore, it is important that taxpayers respond quickly and accurately.
The CP2566 is a notice from the Internal Revenue Service (IRS) that informs taxpayers that their tax return was selected for an audit. This means that the taxpayer's information will be compared to data from businesses and other third-party sources. This can include income, payments, deductions, credits, etc., and any discrepancies could result in additional taxes or penalties. The notice also allows for an appeal and/or explanation of any discrepancies found upon audit. Therefore, taxpayers must respond quickly and accurately.
The CP504 is a notice from the Internal Revenue Service (IRS) that informs taxpayers that their tax debts have been referred to a private collection agency. This means that the IRS has assigned the debt to a third-party collector and will no longer collect it. The notice also includes information about resolving the debt with the collection agency and an appeal process if the taxpayer disagrees with the amount owed. Taxpayers must respond quickly and accurately.
An IRS notice that informs taxpayers of their outstanding debt. The letter lists the total amount owed, payment due dates, and any applicable penalties for late payment or failure to pay. This letter typically follows earlier notices, such as CP2000 or CP2566, if the taxpayer does not respond to them.
Fincent's tax advisors can help you understand all available options and navigate the clearing of unpaid taxes. Fincent can help you manage your payments and restructure your debt to make it more manageable. Additionally, our advisors can evaluate your financial situation to determine if any options exist for reducing or eliminating the amount of taxes owed. We strive to provide sound advice and solutions to help taxpayers reduce their tax liabilities and get back on track financially. Some ways Fincent can be of crucial help to you are:
Fincent streamlined tax preparation feature enables users to prepare for taxes quickly and accurately. But how? Our tax advisors will review your returns and quickly identify any mistakes or oversights. We also provide helpful guidance on deductions, credits, and other relevant tax matters.
Fincent also has automated tax filing, which allows you to submit taxes on estimated dates with the click of a button. This is an efficient way of submitting returns and ensures accuracy. Additionally, our advisors can walk you through the filing process step-by-step to ensure everything is done correctly.
The software also makes generating detailed tax reports a breeze – all the relevant information is calculated and ready for reporting with just one action. This makes tax season less stressful and significantly more efficient.
Fincent is an innovative app that can help simplify the process of paying taxes. With the Expense Tracker feature, Fincent provides users with an easy way to keep track of expenses and generate detailed reports in just a few clicks. This will enable users to calculate their income and expenditure more accurately so that their tax payments are made accurately too.
Fincent can help make filing taxes easier with its tax filing software. Fincent's intuitive user interface makes it simple and quick to accurately complete any tax form so that everything is on time and done right the first time. Fincent walks you through all the necessary forms in an easy-to-understand way and even double-checks each step to ensure accuracy. No more stressing over whether or not you've submitted your taxes correctly! Plus, you can save and store whatever information you need in an organized, secure space, so you won't have to start from scratch when it's time to file your taxes again next year.
No one wants to owe taxes, and late or unpaid taxes can cause serious financial hardship. Fortunately, the IRS has several relief options for those unable to pay their taxes immediately or who need a way to make their tax payments more manageable over time. The IRS also takes steps to collect unpaid taxes, such as sending out notices and letters, conducting audits, and issuing liens or levies. With the help of Fincent, you can make sure your taxes are filed accurately and on time, keep track of expenses to ensure accuracy in tax payments, and explore options for reducing or eliminating the amount of taxes owed. Get help with all your tax needs today – Book a Demo now!
Fincent can simplify the process of paying taxes and handle any IRS collection notices that you may receive. The ultimate at Fincent is to provide sound advice and solutions to help taxpayers reduce their liabilities while getting back on track financially.
Don't wait. Book a demo with us today and let us guide you through your tax woes