Well, if you own a business (C corporation, S corporation, LLC operating as an S), then your corporate tax return should already have been filed.  The rest of you have until the 17^th of April (only this year) to file.  And, there are two new IRS provisions that may make your file submission a little easier. Many of you do not understand that an unincorporated business have a hidden provision that causes you to have a big tax bill.  It’s easier to explain this with a simple example.  Paul Naïve has a wife and two kids.  Paul runs a business that grossed $ 50K  and had expenses of $ 30K, leaving him with $ 20K profit.  His wife works for SmallCo, making $20K, and claims 0 dependents on her paycheck.  (Paul and his wife are sure that this choice, which takes out the most taxes, will save them from a big IRS bill at the end of the year.)   They know that, given the income taxes on $ 40K of income, with their four dependents ,  her withholding tax will cover their entire income tax. The answer is that’s correct- but the wrong consideration.  You see, Paul is self-employed, and his $ 20K of net profit is also subject to social security and medicare taxes- to the tune of almost $ 2500.  Meaning that the Naïve’s will still owe about $ 2500 in taxes to the IRS.   And, they don’t have it.  (Paul should have come to us in January and September- at the least- to help him with his tax planning, and maybe even make some changes in his operations to keep more of his money- but that’s NOT the topic of this discussion, today.) The worst thing the Naïve’s can do (and many do it) is to NOT file taxes, because they owe money.  That means  they will owe penalties and interest.   A failure-to-file penalty (5% of the unpaid taxes each month your filing is late, up to 25% of the total unpaid taxes due) and a failure-to-pay penalty of ½ % monthly (also up to 25%).

Continue reading It’s not the ides of April this year →

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