Business Tax Returns: What Will You Pay for Filing Late?
How Much Extra Will You Pay for Filing Your Tax Return Late?
Filing your business tax return after the September 15th extended due date has some costly consequences. Between federal and state penalties, getting your tax information to us as soon as possible should be a high priority. Although you may have extended your filing due date, Uncle Sam still expected payment of your taxes back on March 15th (or April 15th in the case of flow-through entities such as an S corporation or partnership) and has been charging you interest of 3.5% each month until you pay him. This interest is also charged on penalties you accumulate after your extension due date.
The penalty for late filing is where the tax bill can really start to add up. For partnerships and S Corporations, the penalty is $195 for each month (maximum of 12 months) multiplied by the number of persons who were partners or shareholders during the tax year. This penalty applies whether there is a tax due or not. The state has smaller penalties that they also impose on business owners for late filing and late payment. In Vermont, the penalty for late filing is a flat $50 penalty. But, don’t forget, Vermont also expected their money back on March 15th (or April 15th) and has been charging interest of 5.6% (annual rate) until your balance is paid.
As an example, if a partnership with 3 partners waited 1 year past the March 15th statutory date to file, they would end up paying almost $4,000 of interest and penalties alone between the state and federal government. This does not include any penalty on the taxes due or the taxes themselves, which could be substantial.
For C corporations and individuals, the penalty for late filing is 5% of the unpaid tax each month, up to a maximum of 25% of the unpaid tax. If a return was filed, but taxes were not paid, a penalty of 0.5% late payment penalty is assessed along with the regular rate of interest on the unpaid tax. Since the penalties for late filing are much higher than for late payment, it is recommended that you at least file your taxes, even if you can’t afford to pay them right away. Don’t delay, the September 15th deadline is less than 2 weeks away!
Davis & Hodgdon Associates CPAs has been assisting nonprofits, individuals and businesses with tax and accounting services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].