What Do I Need to Do If I Miss the 2021 Tax Deadlines?
Will You Be Late Filing Your Taxes?
The burgeoning pandemic last tax return filing season, offered one minor benefit, an extension to the IRS filing deadline. But for the 2020/2021 tax season there may be no such luck. Even though the AICPA has been lobbying Congress for an extension of the filing and payment deadline for the 2020 tax year until June 15, 2021, so far this has not been granted. So to be on the safe side, it’s best to plan on the existing filing schedule.
However, that doesn’t mean life doesn’t keep happening and you may find yourself with a long-gone tax deadline and your return only a passing thought. Here’s what you need to do if you find yourself having to file a late tax return.
When Are 2021 Taxes and Extensions Due?
Before we begin discussing what to expect when you file a late tax return, let’s set the record straight on tax deadlines and extension deadlines. For S-Corps and partnerships (LLCs) you have until your March 15th tax day to file your return or an extension. The same goes for individuals and C-Corps, who will have right up until April 15th to file their return or an extension. The caveat in this scenario is that tax payments are always due on tax day – so keep that in mind!
Penalties for Late Tax Returns
Okay, so let’s say your business is a C-Corp and you have found yourself transported to April 16th and wake up to the realization that you neglected to file your taxes or even an extension. What is going to happen to you? Will the IRS come knocking on your door and cart you off somewhere? Thankfully, that’s not in the cards for you (yet!), but you will most likely incur some penalties.
If you owe taxes and don’t file a return or an extension then you can incur a few penalties. First, you will owe the IRS for not filing at a rate of 5% per month of the amount you owe in taxes, plus interest. If you for some reason, file your return or an extension on time but don’t pay your tax obligation then you will only incur a late payment penalty of .5% per month of the amount you owe in taxes, plus interest.
If you are an LLC and miss the March 15th filing deadline, you could be subject to a penalty for each failure to furnish a Schedule K-1 to a partner and each failure to include on that Schedule K-1 all the information required to be shown (or the inclusion of incorrect information). For these missed deadlines and occlusions a $280 penalty may be imposed for each Schedule K-1 for which a failure occurs with the maximum penalty being $3,392,000 for all such failures during one calendar year.
The moral of this story is to file your return as soon as possible since the penalties for this are much higher than a late payment.
The one scenario where you may get off scot-free without filing your return is if you don’t owe taxes and are expecting to receive a tax refund. Though we would never recommend filing a late return in this scenario, either way, it is important to know the outcome of this circumstance.
Is There Ever a Good Reason to File a Late Tax Return?
You may be thinking to yourself, “but I had a really good excuse for not filing my business tax return on time,” and in some situations, your excuse may work but it will only help you avoid penalties, not any of the accrued interest. So what is a good reason for filing late? A good reason could be a natural disaster, or a serious illness (think hospitalization). If you believe you have a good reason for filing your tax return late, you can request a penalty waiver and will need to attach a statement to your return explaining your reasons for filing or paying late.
The Best Action to Take if You Find Yourself Filing Late
What can you do if you will need to file your tax return late? First, take a deep breath, what’s done is done, now let’s resolve it as swiftly as possible. If you will need to file your return late, and your tax day deadline has not passed, then file an extension as soon as possible and prepare to make your tax payment. This will allow you to avoid penalties and interest and will give you an extra 6 months to get your return together.
If your tax deadline has passed and you weren’t able to file an extension, then the best course of action is to prepare and file your tax return as soon as possible (in this case, an extension will no longer be accepted). The quicker you get your return to the IRS the fewer penalties and interest you will be subjected to. In this scenario, you will face both the late filing penalty and the late payment penalty and will begin accruing interest on both, but by getting your return filed and paid as quickly as possible you can mitigate your penalties as much as possible.
Don’t Get Stressed, Simply Take Action
Filing your tax return can inherently be a little stressful, add to that the pressure of a missed deadline and we get it you’re likely feeling overwhelmed. That’s all right, we’re here to help you take action quickly! Simply book some time on our calendar and we’ll help you get your business tax return on its merry way to the IRS.