You’re probably aware that the Internal Revenue Service has granted individuals and certain businesses an extension to filing their tax returns for 2020. But does it apply to your small business? The short answer is, it depends.
The IRS has indeed extended the filing deadline for 2020 tax returns from Apr 15, 2021 to May 17, 2021. However, for businesses, the extension only applies to businesses classified as sole proprietorships and single owner LLCs. All other business structures are still subject to regular deadlines.
Here’s a full list of Federal tax return filing deadlines:
Sole proprietorships and single-owner LLCs: May 17, 2021
Partnerships: March 15, 2021
S Corporations: March 15, 2021
C Corporations: April 15, 2021 (if your fiscal year is the same as the calendar year)
It’s important to note that all other IRS filing dates are the same as usual. State filing deadlines vary, so you need to check with your state IRS officials for more information.
Other Tax Due Dates
All small businesses must file taxes throughout the year. Below is a breakdown of those taxes and due dates.
The IRS provides a scheduled tax payment system to assist small businesses in facilitating payment. It’s based on a projection of what the business estimates it will owe for the year. Payments are due quarterly on April 15, June 15, September 15, January 15, or 15 days following the end of the quarter.
Quarterly taxes include the following:
Income tax - taxes on income earned, both Federal and state
Sales tax - based on sales taxes levied in the state in which your business is incorporated
Employment tax - Social Security & Medicaid paid on the behalf of your employees
Self-employment tax - Social Security & Medicaid paid by self-employed individuals
Excise tax - applies to certain industries
Franchise tax - if your business registered as a franchise
Unless you are a sole proprietor or a single-owner LLC, the due date for your corporate income taxes is April 15. It will take into account the quarterly taxes you’ve paid throughout the previous year.
These taxes are payments for Federal Insurance Contributions Act (FICA) and Federal Unemployment (FUTA) withholdings paid on behalf of your employees, who have them deducted from their paychecks. They are due either semi-weekly or monthly, depending on the size of your company.
The 2020 tax year had some exceptions to the payroll tax payments. Businesses had the option to defer the employees’ share of payroll taxes on wages paid between September 1, 2020 and December 31, 2020. If you chose that route, additional payroll taxes should have been withheld from employee paychecks from Jan 1 - April 30, 2021 to cover the amount.
Affordable Care Act Tax
If you provide healthcare coverage for employees, you are required to submit an annual report of coverage and paid premiums. These are due on February 28 (or March 31 if filing electronically).
What Happens if You File Late?
If you miss any estimated tax payments, they can be paid when filing your annual tax return, but you will pay interest and penalties on what you owe. You can also request an extension on your annual tax return filing prior to the due date. If approved by the IRS, the extension will extend the due date by 5-6 months, making them due September 15 for sole proprietors, and October 15 for LLCs and C-corporations.
Even though you have more time to file your tax return if your extension is granted, you’ll still pay interest on what you owe. But it beats paying the penalties if you don’t request the extension and don’t file on time.
The penalties are steep, with .5% of the unpaid tax amount you owe levied for every month it’s past due, up to a maximum of 25% of the total due. It can also result in repossession of property and even jail time.
Get Professional Guidance on Complex Tax Laws
Tax laws and regulations are very complicated. Understanding them takes knowledge, education, and experience. Unless your business is an accounting firm, you probably lack the expertise in-house to be able to confidently comprehend all the specifics that apply to your business.
Let the professional accountants at Orcutt Financial take the tax filing burden off your plate. We know the tax laws and how to interpret them for your specific situation. You can concentrate on making your business more profitable with the peace of mind knowing that your tax obligations are being met.
Don’t take chances with the IRS. Get help from the pros who know small businesses and how to help them succeed. We’ll make sure you’re covered.