As an entrepreneur, you thrive on innovation and creativity, but when it comes to taxes, things can quickly turn into an absolute nightmare. The clock is ticking, deadlines are looming, and one missed form could cost you more than just money.

A missed tax deadline could jeopardize the very foundation of your business!

So, in this comprehensive guide, we’ll break down everything you need to know about tax deadlines and penalties you may face if you miss them. 

Whether you’re filing as a sole proprietor or setting up an LLC, doola will empower you to turn what often feels like chaos into a seamless process—so you can focus on growing your business instead of worrying about taxes. 

So, let’s dive right in and get equipped with the knowledge needed to tackle this essential part of entrepreneurship head-on!

Tax Deadlines You Should Not Be Caught Missing

Tax deadlines are specific dates set by the Internal Revenue Service (IRS) on which individuals or businesses are required to file their federal income tax returns and make any necessary payments.

The IRS takes taxes pretty seriously, which is why missed tax deadlines are a problem you can’t afford to ignore.

But before you panic, take a deep breath and know that you’re not alone. More than 7 million Americans miss the tax filing deadline every year.

So, before we discuss what happens if you don’t file your taxes, we’ll cover the filing due dates.

1. Tax Return Filing Deadlines

The most important deadline for individuals and businesses is tax filing. However, the deadline to file tax returns varies depending on the type of entity you have. 

For partnerships, S-corporations, and LLCs taxed as a pass-through entity, the filing deadline is March 15th. For sole proprietorships and C-corporations, the deadline is April 15th.

2. Estimated Tax Payments

Businesses are also required to make estimated tax payments throughout the year if they expect to owe more than $1,000 in taxes after deducting withholding and credits. 

These payments are made quarterly, with deadlines falling on April 15th, June 15th, September 15th, and January 15th of the following year.

3. Employment Taxes

If your business has employees or hires independent contractors who earn more than $600 per year, you must withhold employment taxes such as Social Security and Medicare from their wages or pay them yourself as an employer. 

The deadline for depositing these withheld taxes depends on your payroll schedule – whether it’s monthly or semi-weekly.

4. Extension Tax Deadline

If you are unable to file your taxes by the original deadline, you can request an extension by filing Form 4868 (individuals) or Form 7004 (businesses).

This will give you an additional six months to file your taxes, but keep in mind that any taxes owed must still be paid by the original deadline of April 15th.

5. Year-End Forms

Apart from income taxes, businesses also have specific reporting requirements at the end of each calendar year.

Form W-2, Wage and Tax Statement must be provided to employees by January 31st, while Form 1099-MISC is for reporting payments made to independent contractors by the same date. 

Consequences You May Face for Missing Deadlines

Missing tax deadlines not only leads to financial consequences but also has the potential to affect your reputation and business operations.

Therefore, entrepreneurs must stay on top of these deadlines and comply with their tax obligations to avoid these potential consequences.

1. Late Tax Filing and Payment Penalties

One of the most immediate consequences of missing tax deadlines is penalties imposed by the IRS. These penalties are based on a percentage of the amount owed and can add up quickly if not addressed promptly. 

The penalty for late payment of federal taxes can be determined by how much you owe the IRS and how late your tax filing is. So, the more you owe and the later the filing, the more expensive the penalty might be.

For instance, if you do not file taxes on time, the IRS will impose a penalty of 5% of unpaid taxes per month, capped at 25%. Not paying taxes also results in a penalty of 0.5% per month, up to 25%.

2. Monetary Charges

The IRS may impose a fine of a maximum of $50 if you’re late returning a W2 (for employees) or a 1099 (for contractors).

If you mistakenly calculate how much tax you owe or the IRS finds a mistake in your tax filings, the penalty is hefty: a 20-40% increase in taxes owed.

In addition to monetary penalties, late payment or filing also means losing out on potential savings in tax deductions and refunds. 

3. Audit Risks

When you miss a tax deadline, especially for multiple years, it raises red flags with the IRS.

This increases your chances of being audited and having your financial records scrutinized, leading to even more severe consequences if there are errors or inconsistencies in your returns.

4. Negative Impact on Credit Score

Failing to pay taxes or settling them after their due date may also affect your credit score negatively. Late payments reported by taxing authorities could appear as delinquencies on your credit report and lower your credit score significantly.

5. Wage Garnishment

If taxes remain unpaid for an extended period even after receiving notices from the IRS or other taxing agencies, they may resort to wage garnishment as a way to collect what you owe them directly from your paycheck before you receive it.

6. Tax Liens

A lien means the IRS will take claim of ownership of enough of your assets that would be required to pay back the owed taxes and penalties. These assets can include business bank accounts, business property, or even personal property.

Liens are public records, which can make it particularly difficult to secure a loan or investment in your business. It’s because the lenders know you have to pay back the IRS before you can pay back your loan.

7. Tax Levies

Once a tax lien has been ignored for long enough, the IRS sends you a “Final Notice of Intent to Levy.” This means that the IRS is planning to seize property and other personal assets and sell them to pay back your tax debt.

The IRS uses levies as a last resort, which means they only use them after all else fails. This allows them to take money directly from your investment or bank accounts.

8. Criminal Charges

If the above method fails and the IRS believes that you want to evade taxes, combined with a failure-to-file, they will file legal charges against you. You could end up in court, subject to fines, or even in jail. 

Common IRS Penalties You Should Avoid

The IRS can penalize you for things such as late filings, incorrect payments, or missing information on your tax return. You can also face a penalty after an IRS audit when a mistake is found on your tax return.

In general, these are the six most common penalties imposed by the IRS:

1. Information Return Penalties

The IRS may charge this penalty if an information return or a payee statement isn’t filled out correctly or on time. For example, if you failed to send a 1099-NEC form and file the form in time with the IRS, you would face a penalty.

You will be charged a separate penalty for each information return and payee statement filed late or missed with the IRS. The IRS pre-determines these amounts based on the date the return was filed.

doola Tip: Consult our CPAs to ensure all of your payee statements and returns are filled out correctly and on time to keep the IRS out of your mailbox!

2. Failure to File Penalties

As the name suggests, the IRS will charge you a penalty if you fail to file a tax return on time. For example, if you don’t file Form 1120 C for your C-Corp entity by the due date, a penalty is charged for the taxes paid late.

You may have to pay a minimum penalty of $205 if you file your taxes more than 60 days past the due date. However, if you owe less than $205 in taxes, then you will have to pay 100% of your owed amount.

doola Tip: If you cannot file your tax returns on time, you can apply for an extended due date or tax payment plan. Consult a tax professional to identify the correct form type based on your entity type and help you apply successfully.

3. Failure to Pay Penalties

The IRS will impose a penalty for a late payment if the reported tax on your return is not paid by the deadline. The amount you owe in penalties is based on how long your overdue taxes remain unpaid.

You will have to pay an additional 0.5% of the unpaid tax amount for every month until you pay your original tax bill off, capped at a maximum of 25%. So, the longer you wait to pay, the more your penalty will be.

doola Tip: Learn about your tax deadlines based on your entity type to plan ahead, or apply for an extension before the deadline.

4. Accuracy-Related Penalties

The IRS is pretty strict when it comes to irregularities in your tax returns and often charges penalties when incorrect or missed claims are made.

So, if you miss declaring a portion of your total income or apply for deductions or credits that you aren’t qualified for, you will be penalized.

In case of accuracy penalties, you may owe 20% of the total amount reported on your tax return that was underpaid due to inaccurate reporting.

doola Tip: Avoid inaccuracies in your tax return or claim for wrong tax deductions by allowing tax professionals to file taxes on your behalf.

5. Failure to Deposit Penalties

The IRS has been pretty harsh on employers who file their employment tax deposits inaccurately or late. In some cases, they have even charged hefty penalties.

For instance, if you fail to deposit the monthly federal income withheld from your employee’s paycheck, you will be charged a penalty. The amount is based on the number of days that a required deposit is late, starting from the due date.

doola Tip: Invest in a payroll management solution or hire a professional who is familiar with schedules, due dates, and relevant forms to avoid a penalty for failing to deposit employment tax.

6. Underpayment of Estimated Tax by Corporations and Individuals Penalties

The IRS won’t think twice to penalize corporations or individuals who don’t pay their estimated tax payments in full or on time. Your underpayment penalty is based on the difference you owe when your payment is due and the applicable interest rate.

doola Tip: You will have to pay the penalty even if the IRS owes you a refund. So, it is best to pay your tax return using electronic funds transfers, calculate your taxes ahead of time, and apply for a quick refund when you overpay your tax.

Always Be on Top of Your Tax Obligations with doola

When it comes to missing tax deadlines, the IRS is no joke. If your mistake goes beyond negligence and they find you intentionally lying and filing a false return, then you could face hefty fines, have your assets seized, or worse yet—serve jail time.

Fortunately, doola has the answer for you. We follow a streamlined process that ensures your tax returns are filed accurately, along with all necessary documents, before the due date. This way, you never miss a deadline or face penalties for late payments.

In addition to helping you meet tax deadlines, our bookkeeping services include automating your financial record-keeping throughout the year. This proactive approach allows us to guarantee accurate, IRS-compliant books to help you file on time without the risk of penalties.

Consult our tax professionals, who have extensive knowledge and experience in tax laws and regulations, making them well-equipped to navigate complex tax requirements.

Like Sherlock Holmes, they will go through all the nitty-gritty of your finances to make sure that you’re filing and paying the correct amount at the right time!