August is often the time of year for working on late tax returns. Taxpayers frequently wait until after the original deadline to file their business income tax returns. Most of these businesses pay a substantial price in penalties and interest. Many local governments for instance, charge a penalty of 5% per month. If the original tax return deadline was in April and the taxpayer waited until September to file and pay the overdue tax, the business would be charged a maximum penalty of 25%. In addition to the penalty, the local government would also charge an interest rate of 12% APR.
These penalties can be avoided by using an extension to pay the owed taxes. However, many of these businesses have a difficult time determining their tax liability before they summarize their tax information. Similar penalty and interest charges are levied by federal and state governments. As you can imagine, these charges are much greater than the local charges. Beware of the additional costs involved with filing late taxes.
If you typically take part in filing late taxes, please contact us to discuss how we can assist you with developing a plan for filing on time next year.
posted by Billy Upchurch, CPA/ABV/CFF, CFE, CVA