When running a business, one of the most important aspects is filing your Business Taxes. While taxes can be a distressing topic, it’s vital to know the benefits and drawbacks of paying them on time.
Doing so can help plan ahead for future endeavors and ensure you don’t owe more than you have available.
What Are Business Taxes?
Before learning the advantages and disadvantages of paying your business taxes on time, and learning useful tips to help you plan ahead, it’s important to know what they are and how they impact your company.
Taxes must be filed annually to avoid penalties, such as fines and jail time in extreme cases. Business taxes include income tax, estimated tax, self-employment tax, employment tax, and excise tax, depending on the needs and daily operations of your business.
Each has a different method of being paid, and some only apply to certain businesses. Knowing what type of taxes must be paid will help you get your affairs in order before the season starts. It’s best to begin researching beforehand while keeping detailed records so that you don’t miss anything when filing.
What Are The Advantages Of Paying On Time?
Paying taxes for your business helps it remain compliant with the IRS.
When you pay your business taxes on time, there are added benefits, as well. According to the IRS, you’ll avoid added interest and penalties that could be costly. You’ll also avoid losing future refunds, as this is the first balance used to pay any taxes owed when payment is delayed.
Penalties can pile up quickly, both for filing late and paying late. To avoid unnecessary costs adding to your expenses, pay your business taxes on time. This will avoid the most trouble in the long run and spar you any issues with the IRS.
Delayed payments can cause the IRS to file a tax lien, which can damage credit scores and make loans harder to secure. Rather than put your company’s credibility at risk, it’s oftentimes better to pay it forward than owe it later.
What Are The Disadvantages Of Paying On Time?
The disadvantages of paying your taxes on time can be costly. For example, without the proper precautions, you can owe more than expected. This leads to a scramble to find the necessary funds, which could have been avoided with early payments throughout the year.
Making estimated payments as you earn income will help offset the amount you owe, which is like paying early. This will save plenty of trouble later on, and prevent you from missing any important bills.
Another disadvantage is that paying on time means not having access to the funds you need. The money spent to cover taxes will leave your account, and anything that you could have used those funds for will need to be covered elsewhere. For small businesses, this isn’t always a feasible option.
Instead, filing for an extension can help delay the due date without incurring penalties on the total owed to the IRS. The deadlines for filing for extensions vary, so it’s important to research what you qualify for as early as possible – avoiding a tax lien should always be a priority.
Final Thoughts On Paying Business Taxes
While there are many types of taxes that businesses deal with, it’s important to pay them on time. Businesses that would benefit from a later payment should file for an extension as soon as possible. Regardless, setting aside income or revenue to offset the final bill will spare your company plenty of grief come tax season.
It’s always best to contact a professional for help navigating your taxes!