Rose Report: Issue 20
“In this world nothing can be said to be certain, except death and taxes”
The first wave of deadlines occurred on March 15. That’s when corporations were supposed to file 1120 and 1120S returns. However, companies may apply to extend that deadline until September 15.
The April 15 deadline applies to partnerships filing 1065 returns as well as personal tax returns. Both of these can also be extended—to September 15 for 1065 returns and to October 15 for individual tax returns. Finally, nonprofits filing their 990 returns must adhere to a May 15 deadline, or can apply for an extension to August 15.
If you choose to file an extension, there are several important factors to keep in consideration. First, although an extension grants extra time to get paperwork to the IRS, it does not extend the time you have to pay any tax due—you will owe interest on any amount not paid by the deadline. As such, it’s crucial to put together an accurate estimate of the amount you owe the government. Underpayment penalties can be substantial.
If you don’t have the funds at the ready, you should still submit the extension paperwork without providing the money; this could save you from having to pay a failure-to-file penalty. According to IRS.gov, “The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late.” Moreover, if you don’t file an extension, you will lose some of your amending capabilities when you eventually do file.
Another expensive mistake that companies often make is not filing in every state where they produce revenue or employ staff. “While some companies may feel that there operation is too small to file in a particular state, an analysis must be completed to determine the potential consequence” says Rose Financial Services partner Timothy Fargo, “The penalties can be extensive.” Even if a company just produces $1 of revenue in a particular state, they may still be susceptible to minimum filing fees.
Finally, remember that the best time to perform annual tax planning is when last year’s taxes are fresh in your memory. With your 2013 return in hand, you’ll be in a good position to make informed adjustments and changes for 2014 based on last year’s numbers.