While it may seem simple, becoming a small business owner is anything but. From long hours to making very little money your first couple of years, running a small business can be complicated and overwhelming at times. One of those times comes around once a year when the taxman comes calling. In many cases, it is better to ask for a tax extension from the IRS, Internal Revenue Service, than it is to rush and do your taxes the wrong way and pay for it later. With that being said, read on below for a few of the top reasons to ask the IRS for a tax extension as a small business.
6 Extra Months to File
Applying for a tax extension gives you six months longer to get your taxes in order. This comes in handy if you are waiting on certain tax documents to come in the mail or need that extra time to get your tax deductions in order. It also gives you more time on filing your gift tax return as well.
Reduces those Pesky Late Penalties
Late penalties on taxes can make or break a small business, especially if this is your first year in operation. There are two penalties that the IRS, Internal Revenue Service, can impose on late taxes. The first is 5 percent per month on any owed taxes for filing late. The second is plus a ½ percent per month for a late payment. If you get a tax extension and have your taxes filed and turned in by Oct. 17, you can avoid that 5 percent late fee and just be stuck with the half. While it may not seem like a lot, that is a ton when it comes to owing taxes.
Of course, where there is an upside, there is a downside to filing for a tax extension as well.
Some Businesses Aren’t Eligible
Just because you file for an extension, doesn’t mean you are eligible and will be granted an extension. If you are approved, you are put in a 5-year probationary period, and if you fail to file by the April 15th deadline, the extension could be revoked, and you would end up owing the money right away.
Filing Doesn’t Mean Extra Time to Pay
Filing for an extension doesn’t mean that you have extra time to pay whatever it is determined that you owe the IRS. You will still be charged interest and the late penalty of a half a percent.
While filing for a tax extension has its pros, it can also have its cons as well. If in doubt as to which way your small business should go, it’s best to contact the professionals and ask for some expert advice. If in doubt about whether you should file taxes, it’s always best to go ahead and do so. For more information, on filing electronically, contact the professionals at Wage Filing today for help.