Small Business Taxes – Four Mistakes to Avoid

Mistakes on your small business taxes can be costly to your business’s success. In fact many times the penalties and fines from improperly filed taxes are enough to put a business under for good. Therefore if you are a small business owner it pays to understand these common tax problems and avoid them.

Underpaying Estimated Taxes.

Many small business owners get hit with this penalty. The IRS states that all self-employed individuals must estimate their taxes for the year and make quarterly payments. If the IRS does not receive these quarterly payments within five months of the due date they can (and will) assess a penalty in the amount of 25% of the taxes owed. Additionally the taxes and penalties increase and compound until rectified.

Failure to pay on time.

The IRS accesses a penalty of 0.5% to 1% a month to a income tax bill if they don’t receive your payment on time. This penalty is automatically applied by the IRS computer system whenever you pay late or miss a payment. Although the fine for failing to pay on time seems relatively low the fines for failing to pay payroll tax are much greater.

Filing late.

If you file and income a tax return or other tax forms late the IRS can access a 5% fee on your balance for each month you are late. However there is a cap – you can only be assessed this fine for up to 5 months or  until it reaches 25% of your total tax bill.

Filing late and paying late.

If you both file late and underpay the IRS can impose a fee of 25% of the total amount owed. After the five months the IRS continues to assess a “failure to pay penalty” at 0.5% a month until the total penalty has reached 47.5% of the total tax bill.

If you need assistance with your small business taxes contact one of our highly skilled tax professionals today!