What Happens If You Don’t Pay Business Income Tax?

What Happens If You Don’t Pay Business Income Tax? – While it is generally preferable to pay all of your business taxes on time or as soon as possible, this is not always achievable. However, the sooner you pay and the more you pay, the less interest and penalties you’ll have to pay.

When federal income taxes are due, how and when to pay, penalties for non-payment and some payment options are discussed in this article.

Federal Income Tax Due Dates

For each legal type of business, the IRS establishes a due date for filing tax returns. The payment date is the same as the filing date.

The deadline for small firms to file their business taxes on Schedule C as part of their personal taxes is April 15, the same as the deadline for personal tax returns.

The 15th day of the third month following the end of the tax year is the deadline for filing partnership income tax returns. The due date for partnerships with a tax year ending on December 31 is March 15 of the following year.

The 15th day of the fourth month following the end of the company tax year is the deadline for filing corporate income tax returns. The due date for corporations with a December 31 tax year is April 15.

The 15th day of the third month after the end of the tax year is the deadline for S corporation income tax returns. The due date for S corporations with a December 31 tax year is March 15.

The number of members (owners) determines the due date for limited liability company (LLC) returns:

  • Schedule C, with an April 15 due date, is used by single-member LLCs to pay as sole owners.
  • Multiple-member LLCs are taxed as partnerships, with a March 15 due date.

These deadlines are subject to change each year. The due date is the next business day if the due date falls on a weekend or holiday.

Penalties and Interest for Non-Payment

Taxpayers and corporations who do not pay their taxes online or who do not pay at all face penalties and interest from the IRS.

Failure to Pay Penalties

For failing to pay taxes by the due date, the IRS charges “Failure to Pay” penalties based on how long the delinquent tax remains unpaid. Taxes must be paid during the year, either through withholding from earnings or other payments or by paying quarterly estimated taxes, according to the IRS.

Even if a small business owner receives a refund, they may be charged a penalty if they do not pay enough during the year. If a corporation fails to pay its anticipated tax on time, fines may be imposed.

Interest on Unpaid Taxes and Penalties

The balance you owe for underpayment begins on the due date, and interest may be levied on penalties.

If you pay in full on or before the “pay by” date, you won’t be charged interest on the amount mentioned on the notice of underpayment. Depending on the IRS’s algorithms, interest rates may fluctuate quarterly.

Other Penalties

Other fines may be imposed for non-compliance with other business tax laws:

If your tax return isn’t filed on time, it’s considered a failure to file.
Penalties for inaccuracy if all income isn’t claimed or if deductions or credits are taken that aren’t allowed.
For failing to file a timely information return (partnership information returns, for example)

Interest in Underpayments and Penalties

The balance you owe for underpayment begins on the due date, and interest may be levied on penalties. If you pay in full on or before the “pay by” date and get a notice of underpayment, you will not be charged interest on the amount listed. Depending on the IRS’s algorithms, interest rates may fluctuate quarterly.

If Payment Still Isn’t Made

The IRS also has other, more severe options for tax payments. Tax liens and levies are examples of this.

A levy is a court-ordered seizure of property to pay a tax debt. Taking money from a business owner’s bank account or other financial accounts is an example of a levy.

A tax lien is a public document filed with a court that informs creditors that the IRS has a legal claim on their property.

In both circumstances, the IRS assesses the liability and issues a Notice and Demand for Payment to the taxpayer. The IRS issues a public document in the case of liens to notify creditors of the government’s claim to the property. All of the taxpayer’s assets, including business property, are encumbered by the lien.

A tax lien is a public document that can harm your credit report in addition to having your property seized. Tax levies aren’t made public and have no bearing on a taxpayer’s credit score.

Alternatives to Payment by the Due Date

Here are some options for paying the entire amount of tax owed on the due date.

Get a Short-Term (120-Day) Extension

A short-term extension enables a taxpayer up to 120 days to pay tax, penalties, and interest on sums under $100,000. There is no fee, however, there will be a late payment penalty with interest.

Pay by Agreement or Installment

The IRS may allow you to pay your taxes through an installment plan. This option is contingent on the amount you owe. You can pay your taxes in installments by using the IRS’s Online Payment Agreement. Go to the Online Payment Arrangement website and spend a few minutes working your way through the online prompts to check if you’re eligible for this type of agreement. The Online Payment Agreement is only accessible on the internet during specific hours and days.

Apply for an Offer in Compromise

The IRS understands that a person’s financial situation may prevent them from paying their taxes. In these situations, the taxpayer may be entitled to submit an offer in compromise to settle the tax liability for a lower amount than the whole amount owed. Each circumstance is assessed on its own merits. This option should be used only as a last resort. You can use the IRS’s Offer in Compromise Pre-Qualifier to check if you are eligible to apply.

Frequently Asked Questions (FAQs)

What do I do if I can’t pay property taxes on my business?

Property taxes in the United States are paid to counties and are governed by state laws. You must pay your property taxes to the tax collector (not a property tax appraiser, who values property).

If you are unable to pay your property taxes, you may be charged interest on the outstanding balance. Partially paying unpaid real estate taxes is prohibited in some areas, but your state may allow installment agreements.

If you are unable to make your property tax payments, contact your local property tax collector for assistance. For more information, you might want to contact your state’s tax department.

Can you go to jail for not paying business taxes?

If a taxpayer is convicted of any of the following, he or she may face criminal charges and probable prison time.

  • Willful failure to file a return, provide information or pay taxes that are owed
  • False statements or deception
  • Creating and submitting a false tax return
  • Theft of identity or
  • Evasion of taxes

The terms “tax evasion” and “tax avoidance” are not interchangeable. Tax avoidance refers to acts taken by taxpayers to reduce their tax liability, such as taking use of allowed deductions and credits. Tax evasion, on the other side, is the willful failure to pay or underpay taxes.

Because tax evasion is willful, it is a felony punishable by fines of up to $100,000 and imprisonment for up to five years, or both. Because tax evasion is a federal offense, it will result in federal prison time.

What do you do if you are behind on business taxes?

The best course of action is to contact the Internal Revenue Service. If your company is a corporation, S corporation, or partnership, you can utilize the IRS business number. Call the personal phone number if your business revenue is included in your personal tax return.

You can also read this article on how to apply for a payment plan online to learn more about how to qualify for an individual or company plan, what information you’ll need, and how to apply. To apply, you must first create an account with the IRS.

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