Today TaxMama hears from Jaleh in Delaware with this concern. “When you file an extension with the IRS for your business and personal tax returns, and you owe taxes that year, do you have to pay penalty and interest on the money once it is paid? I received a bill and I’m not sure if it’s because my accountant did not file the extension or this is just the way it is and your accountant can cost you more by not getting your returns done in a timely manner.”
From what you tell me, it does seem that your accountant did file your extension.
When did you give your accountant the data with which to prepare your return?
The penalty does not come because your accountant didn’t prepare your tax returns in a timely manner. The penalties are for not paying your taxes by April 15th – or for not having made estimated tax payments during the year.
When you have a business, and you’re living on the income from the business, you most likely have a taxable profit. You should be meeting with your tax professional each quarter to review your profits and to determine how much your quarterly estimated tax payment should be.
Your penalties should be pretty low. The rate is 1/2% per month until you file your return, within the extension period. And the interest on it is quite low as well.
I recommend that you stay in better touch with your tax pro throughout the year and make your quarterly estimated payments. If your tax pro doesn’t have time for you, find someone who does.
And remember, you can find answers to all kinds of questions about small businesses and other tax issues, free. Where? Where else? At TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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