We Asked Our CPA/Tax Expert Clients:
If there was ONE thing you’d want every business owner to think about in March, especially as it applies to business taxes vs. personal taxes, what would it be?
From Mikell Wilcox, CPA, Founder of Aqtoro: Reliable & Honest Tax and Bookkeeping Services in Denver
There is a pervasive myth that extending your return increases your chance for an audit. In fact, if you could say anything, the reverse is true. Not only does it not increase the risk, but if more time on your return allows it to be filed without errors or estimations, it decreases your risk of an audit.
However, an extension to file is not an extension to pay.
From Ryan Nguyen, CPA, Founder of Nguyen & Associates, CPA
A couple of things to think about: Because you own a business, it’s important to pay estimated taxes throughout the year. If that is not done, you may have a significant tax liability when your taxes are prepared.
If you need to file an extension, that gives you extra time to file your taxes; however, it does not give you extra time to pay your taxes. Any tax liability that you owe is always due on April 15 (or Tax Day) regardless of whether an extension is filed or not. If taxes are not paid, you will incur a failure-to-pay penalty, which is charged at 0.5% of the balance due for each month that you don’t pay. There is also interest, which is incurred at about 6% annually until your taxes are paid. And remember, this is whether you file an extension or not.
The extension saves you from a different penalty—the failure-to-file penalty, which is charged at 5% of the balance due per month until you file your return.
