What to Know When Filing Business Taxes Late for Your First Time

By Jim Conroy, CEO of The Neat Company

You made it through your first year in business and you’re still going. But now the calendar has turned and you’ve missed the deadline to file your first taxes for your business. What do you do now? It’s no longer about what forms you need or what you’re expected to report. It’s the terror of filing your business taxes late. Use this article as a starter and breathe.

Key Takeaways

Filing taxes is less stressful if you’ve kept good records.
Your business structure determines how you need to file.
If 2024 is your first year, these tips will make next year a snap.
If you’re filing business taxes late, not to worry, there’s a way!

If you’re like most people who began their business in 2023, you dreaded your 2023 tax filing with the Internal Revenue Service (IRS). And now, April 15 has passed, and whether you felt prepared or unprepared, you’re going to have to suck it up and file late.

It was the fear, of course. Most first-time filers worry about the same things. The sheer size of the federal tax code terrifies a lot of small business owners, home business operators, and side hustlers. They fear making errors. Horror stories about what the IRS will do when mistakes are made can chill the spine of any independent contractor. Often a first-year-business taxpayer learns on the go — or in the last weeks leading up to filing (and paying) for the first time. Or after. And all of these fears seem to be multiplied by the time demands of operating a first-year business when everything is new and takes longer than it would for an established venture.

Understanding Your Business

There are two kinds of business when it comes to filing taxes for the first time. You’ve either kept good records or you haven’t. Many businesses start operations with their eyes open and their homework done. If this is you, all you need now is to identify the proper forms to use and do the math. If you started doing some freelance or gig work and by the end of the year realized you had become a business, you may be less prepared. You may not know which type of business yours is and you may not have good records for what you’ve been paid and spent on expenses.

Records

You should have bank statements, invoices, and purchase receipts for your business. If you set up your business before you began operating, you opened a bank account specifically for it. You may also have obtained a business credit card. Those make it easy to report your revenue and your expenses. If you didn’t… you’ll have to capture the relevant information from the checking account and credit card account you also use for your personal needs. You’ve also given yourself a task for this year: Open dedicated accounts for your business. If you’re just starting out now, you’ve been warned.

This is important because it will save you a lot of work when you have to figure out which items on a credit card or check statement relate to your business and which ones don’t. Since most business-related expenses can be subtracted from your income and leave you paying less, being able to identify 100% of them is to your advantage.

Forms

How you’ll pay your taxes will depend on your business structure.

If you’re a sole proprietor, your business is your own. Your income and expenses are reported on your personal income tax using Schedule C to report your business income (or loss) and, if you have more than $400 in earnings, Schedule SE to calculate your self-employment tax.

If you’ve got a home office, remember that you can deduct a dedicated space for doing work. Using the dining room table to fill out paperwork doesn’t count. A den with exercise equipment doesn’t, either.

If you have created an LLC, an S Corporation, or are a partner in a partnership, your income and expenses are reported on Form K-1. You probably don’t do that math unless you’re the only person in your LLC or S Corporation. All of these are known as pass-through entities, where your share of the expenses is reported on your personal income tax. (S Corporations also file a separate tax form; LLCs do not.)

Types of Small Business Taxes

Income tax. Income tax is the tax you pay on your business income according to the schedules published by the IRS. The jurisdiction in which you operate may also assess an income tax. Depending on how much business you do with customers outside your main business you may have created a nexus, and need to file taxes in another state. This is where you may want to consult a tax professional.
Estimated tax and deadlines. The IRS expects taxpayers to pay as they go, whether they’re an individual or a business. As a business, you’re expected to pay as you go through quarterly estimated payments in April, June, September, and the following January.
Self-employment taxes. If you’re self-employed and not receiving a K-1 form (income from which is reported on Form 1040), you are expected to pay your own Social Security tax of 12.4% of your net income and Medicare tax of 2.9% of your net income on Schedule SE.
Employment/payroll taxes. If you have employees, you must withhold a portion of their pay and deliver it to the IRS. You are also responsible for half of their Social Security tax and Medicare tax. You’ll also need to pay federal unemployment tax (FUTA) on the wages and salaries you pay with Form 940. This should have been filed by January 31 of this year for 2023. You also should have provided your employees with a Form W-2 by January 31, 2024. IRS Publication 15 covers this in great detail. If you’ve got employees, it probably will pay to have a tax or HR professional help you with employment tax adherence.
Excise tax. Some businesses in specific industries may need to pay excise tax. These are usually for fuel and transportation.

Filing your 2024 Taxes Late

But April 15th has passed, and you’re! Or you didn’t realize you had to add your business income to your personal income. You’re going to have to file with the Internal Revenue Service (IRS) for the first time as a business — late! — or amend the personal taxes you’ve already filed.

But don’t panic. There’s much you can do to get on track to file your business taxes late!

Did You File An Extension? Then you’re okay until October 15 (as long as you made your tax payment with your Form 4868). If not…
File Your Taxes As Soon As Possible. The longer you wait, the more penalties and interest you may incur. They add up monthly. Read more about the IRS late fees here.
Pay Any Owed Taxes. If you owe taxes, try to pay them as soon as possible to minimize penalties and interest.
Contact the IRS or Tax Authority: If you have a legitimate reason for missing the deadline, such as an illness or a family emergency, you can contact the IRS or your tax advisor to explain your situation. It is worth looking into whether you can get assistance or set up a payment plan. Right on Form 4868 the IRS says, “The late payment penalty won’t be charged if you can show reasonable cause for not paying on time.” So there’s always hope.
Stay Organized for Next Year. Filing your business taxes late is a great learning experience. Use this experience as a lesson to stay organized for next year’s taxes. Utilize the advice in this article to stay on top of your 2024 taxes so 2025 is a breeze. There is no time better than now to begin!
Consider An Amended Return If You Filed Late Fast. If you find deductions or income you should have reported originally, you can file an amended return up to three years from your filing was originally due. You may owe additional penalties and interest, or, if you have money coming back, the IRS will pay you interest.

From Now On

If you missed anything, consider it an opportunity to learn when filing next year. Be organized; think of tax planning as a year-round responsibility. A Document Management System (DMS) can capture all your receipts, invoices, and related documents and even generate key reports. Seek help; business taxes are rarely a solo activity. There are paid professionals in your area; some organizations, such as AARP, offer volunteer help (even to non-members). The IRS has an online Small Business and Self-Employed Tax Center, another for filing, and a telephone number devoted to answering business tax questions: 800-829-4933.

Remember that everything we discussed here will apply differently where your business is conducted. Your city, county, and state may all require your business to pay taxes — maybe even if you don’t pay personal income tax where you are.

But mostly, don’t panic! Take one step at a time and you’ll be ready by October if you filed a 2023 extension; you’ll minimize your penalties if you file as soon as possible; and by April of next year for your 2024 taxes!

The post What to Know When Filing Business Taxes Late for Your First Time appeared first on Home Business Magazine.

Original source: https://homebusinessmag.com/money/taxing-times/filing-business-taxes-late/