The tax return deadline is quickly approaching, so if you haven’t filed your taxes yet, you still have a bit of time (but not much!). I’m basically reminding myself of this because I still haven’t filed my taxes yet. Gasp! I know right?!
The main reason I haven’t filed yet isn’t for a lack of trying, but because I found an error with two 1099-MISC’s that clients sent me. So I’m waiting for those to be corrected, as well as waiting for the bank to send me a 1098 for some investments I sold last year.
When you’re an entrepreneur who runs a small business it takes a lot more time to get all the tax details in order. I’m doing my very best to make sure I file by the tax return deadline, and in fact have already started filing, I’m just not able to finish them.
If you’re in the same position I am, take these next steps to ensure you don’t miss the upcoming due date.
1. Get corrected tax statements
After checking the 1099-MISC I received from clients versus my income statements and deposits, I noticed a $250 discrepancy. One of the forms showed that I received $50 more than I actually billed, and the second one showed that I received $200 more than I actually deposited.
This means I will be taxed on $250 of income that I never received. #notcool There’s no way I’m going to let that slide!
If you have incorrect statements, or are simply waiting for documents that haven’t been sent out yet, you need to jump on this right away.
Write up and email or jump on the phone, to put some extra pressure on the accounting department to send over the documents you need. People are busy (especially during this time of year) so you may have to remind them several times before they will give you what you need.
Aim to get your tax documents as soon as possible because each day you haven’t filed your taxes by the tax return deadline means more fees that will be assessed to your account.
2. File online right away
File online ASAP. Don’t wait to submit it via snail mail as that could delay the processing and cause you to get slammed with late fees. There are multiple IRS approved filers that allow you to efile your tax return for free. And the best part is that it will usually be processed within 24 hours.
But don’t freak out if you’re unable to obtain all of your tax statements before the deadline. Sometimes it’s just not possible to get everything in time, no matter what you do.
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I know this is scary but take a deep breath and know that you have options. Simply file your tax return as-is and prepare to do an amended return once you have the corrected tax statements.
This will likely cost extra money (if you pay a tax professional) as well as additional time to prep and fill out the forms. An amended return can’t be filed electronically like a regular tax return, so you will have to send it via snail mail (with return receipt requested).
This also means that if you expect to get money back that it will take several weeks, or even months, to get the amended return processed. So yeah, tough luck if you’re hoping to access those funds soon. #sigh
3. Submit an extension
You can avoid filing an amended return by choosing to file an extension instead. You’ll be able to give yourself more time, which will help relieve some of the pressure. Doing so will give you until October 15th of this year to get your taxes filed correctly.
This is likely the option I’ll be choosing if I’m unable to track down the corrected tax forms in time. Beware though, that if you owe any tax you’ll still have to pay the estimated balance by April 15th. So it’s not like you’re able to avoid the tax return deadline scot-free.
I suggest booking an appointment with a CPA or tax professional now so you can at least put in all the information you currently have and work on an estimated balance due. Or if you feel confident enough, print Form 4868 directly from the IRS website to request an automatic tax extension.
4. Pay what taxes you can
Finding that you owe a large amount of taxes downright sucks, but it’s important to pay as much of the balance as possible.
This will keep the extra fees and penalty charges to a minimum, then you can apply for an installment agreement for the remaining balance. If approved, this process will completely eliminate you from having to pay excess fees and interest charges.
If for some reason you do miss the tax filing deadline, expect to pay one or all of these additional fees.
- Failure to File Penalty – There is one loophole for this though, if you can prove to the IRS there was a valid reason for paying late, they are open to hearing it. The failure-to-file penalty (FTF) fee is of 5% per month, up to a 25% max, for each month you don’t file your tax return.
- Non-payment Tax Penalty – If you do an estimate and find that you owe a balance, your account will be charged a failure-to-pay (FTP) penalty charge 0.5% on the amount of unpaid taxes, each month they are outstanding. If you filed your tax return on time but didn’t pay the entire balance owed, this fee will decrease slightly. Do what you can to not compound your fees.
- Underpayment Fee – As I mentioned, you want to pay as much of your tax balance as possible, to avoid an underpayment fee. This penalty varies depending on what category your situation falls into. If the IRS classifies this as a one-time thing, the fees may be very small, but if this is a recurring problem the fees could be quite high.
For more information on avoiding additional tax fees and other penalties, check out the IRS website.
In some cases it’s often a better option to take out a small personal loan or pay your tax balance with a credit card, than to owe the IRS money. You could save a lot of time, money, and headache versus the high interest rates and fees that the IRS charges.
And NO ONE wants to be in debt to the IRS. Trust me on that!
5. Set up a system for next year
Whether you love it or hate it, the tax return deadline comes around year after year. (What am I talking about? We all hate tax season!) Some years you’ll have an easy time getting everything together, and other years you’ll have to deal with a lot of errors and organizational nightmares.
To avoid these ups-and-downs it’s best to set up a good tax system for next year. In other words, stop procrastinating to the last minute! Ha. I’m mostly yelling this at myself right now.
If you don’t have time to do the bookkeeping yourself, hire someone to help manage it. A bookkeeper will likely only cost $100 or so each month and will be well worth the investment — especially if you can avoid owing the IRS thousands of dollars next year.
In addition, you’ll be less stressed knowing that you have a good plan in place, which will save you time and give you peace of mind. Those benefits are priceless.
If you want to tackle the finances yourself, sign up for small business bookkeeping software, or use a spreadsheet, to track your monthly transactions. It will be a lot easier to simply print out a report of your income and expenses if you set aside a few minutes every month to do a little bit of bookkeeping.
Beating the tax deadline doesn’t have to be stressful. With TaxACT, everything you need to confidently prepare and e-file your taxes is right at your fingertips. You got this. File your simple or complex federal return free today with TaxACT Free Edition.
Are you a procrastinator like me, or did you already file your taxes this year?