The tax deadline is here, and that means it’s time to not only gather your documents and file your annual returns but also to plan for the coming tax year. If your only income sources are W-2 based, the annual tax deadline will be your main focus, but if you are self-employed or own a business, you face several other deadlines over the coming months. Every deadline is important, and the penalties for missing one are not insignificant, so it is critical that you are prepared to meet them throughout the year.
What are some of the most important tax deadline individuals should be aware of in 2023?
- If you are an employee or contractor, your employer should have sent out W-2 forms and most 1099 forms by January 31st. If you have not yet received yours, you should promptly take action to find out why and, in any case, get another copy.
- April 18th is the big day for several deadlines:
- Last day to file your return without risking penalties and interest.
- Last day to file for an extension, which will give you until October 16th to file. You still must pay estimated taxes immediately, however, or you will be liable for interest when you do file your return. An extension simply gives you more time to do the paperwork, not to pay your taxes.
- Last day to make IRA and HSA contributions for 2022.
- The due date for the first quarter is the estimated taxes for 2023 if you are required to pay them.
- June 15th is the due date for the second quarter estimated taxes if you are required to pay them.
- September 15th is the due date for the third quarter estimated taxes if you are required to pay them.
- October 16th is the deadline to file your return if you applied for an extension.
- January 15th, 2024, is the due date for the fourth quarter estimated taxes if you are required to pay them.
What are the most important tax deadlines businesses should know in 2023?
In addition to the estimated tax due dates listed above:
- March 15th is generally the filing deadline for some business types – partnerships, S-Corps, and multi-member LLCs. As with individuals, most businesses can file for an extension if necessary.
- April 18th is generally the filing deadline for C-Corps and sole proprietorships.
- September 15th is the filing deadline if your deadline was March 15th and you filed for an extension.
- October 16th is the filing deadline if your deadline was April 18th and you filed for an extension.
Will I get audited if I file for an extension? This is a widespread belief, but in fact, the opposite is likely true! That is, it’s more likely you’ll get audited if you rush your paperwork to get it in by the tax deadline than if you file an extension and take the time to make sure everything is correct.
What are the consequences of missing a tax deadline? There are several possibilities, including :
- A late filing penalty, usually 5% of the unpaid taxes per month, up to a maximum of 25%
- A late payment penalty, usually 0.5% of the unpaid monthly taxes, up to a maximum of 25%.
- Interest charges are usually based on the federal short-term rate plus 3%.
- Enforcement actions. If things get out of hand, the IRS can garnish your wages, seize your accounts, or place a lien on your property.
Can I still file my return if I miss a tax deadline? Of course. In fact, you still have to file a return, and you should do so as quickly as possible. If you did not file for an extension, you might be liable for penalties and interest, but the only solution is to minimise them by filing and paying your taxes as promptly as possible.
What if I can’t pay my taxes by the tax deadline? No matter your situation, taking every possible step to minimise interest and penalties is critical, as they can become unmanageable over time.
Those steps may include the following:
- Contact the IRS. The IRS may offer you a payment plan or a temporary collection delay depending on your circumstances. They may even – rarely – make an offer in compromise to accept less than the full amount owed.
- Pay as much as you can. Any amount you can pay will reduce the mothballing burden of penalties and interest. The IRS may view that payment as a good-faith effort, making things like a temporary collection delay more likely.
- Consider a loan or credit card. Generally speaking, it’s not advisable to incur a debt to pay a debt. However, depending on your situation, you may find the penalty-free interest charges of a loan or credit card to be preferable to the penalties and interest that the IRS will apply.
Conclusion
Taxes for individuals and businesses are a fact of modern life. The processes for filing and paying them are strict, and the punishments for not doing so on time can be severe. By knowing how the rules apply in your specific situation, staying on top of the relevant deadlines, and ensuring you set aside enough earnings to pay taxes when they are due, you can eliminate a significant risk to the financial health of yourself and your business.