Whether they’re late tax forms, quarterly employer filings, or certain information returns, there are all kinds of potential situations that can complicate your ability to file tax forms and information returns in a timely and accurate fashion. You may have just found out that an employee or contractor failed to provide you with accurate payee information. You may have found out last-minute that your accountant or tax preparer has been derelict in their duties, and you simply don’t have time to recover to avoid filing taxes late.
Address the Problem as Soon as Possible
There are certain situations—natural disasters, violence, unexpected injury/illness, death—that constitute a reasonable cause for failing to file. In almost every other case, however, you can’t simply bury your head in the sand as it were without expecting to pay a hefty price. What you can do is file for an extension. Aside from the fact that you’ll still have to pay interest on any unpaid tax liability, you can avoid most other types of late penalties by filing an application for an extension with the IRS. The form you need depends on the type of filing for which you’re asking for an extension. Not to worry, you can quickly find the form you need from this list.
Individual Penalties for Filing Taxes Late
As an industry-leading software provider for small business payroll and employer filings, Advanced Micro Solutions (AMS) primarily deals with businesses that have questions about late tax form and employment filing penalties. Still, we don’t mind offering some basic information about filing taxes late on Form 1040 (Individual Income Tax Return). Long story short, the biggest potential risk may not be penalties that are actively assessed by the IRS, but rather forfeiting some or all of your refund and being unable to claim income tax deductions that you would have otherwise qualified for. Individuals can find more tips for filing taxes late here.
Business and Employer Late Tax Form Penalties
With this in mind, we wanted to provide a more comprehensive portal so that businesses and employers can get the answers they need, quickly and reliably, about potential penalties for late tax forms.
- Late 941 Penalty: We start with one of the most common late tax form filings. It’s no wonder, either. This quarterly federal tax return reports and reconciles the payroll and income tax liabilities with the deposits you’ve made throughout the quarter. If you’re behind or if you’ve filed to deposit these withholding taxes, you’ll be facing an escalating schedule of interest-based late payment penalties. At the same time, a late 941 penalty is likely to be assessed if you fail to file Form 941. Section 12 of IRS Pub 15 states that, without a deadline extension, there is a Failure-to-File and/or Failure-to-Pay penalty that generally amounts to 5% of the unpaid tax due for each month, including partial months, that the return isn’t filed. Section 12 also lays out the ways a late 941 penalty can be reduced or reach maximum penalty amounts. It also explains how you may become personally liable if your business fails to pay its liabilities to Social Security and Medicare.
- Late 1099 Penalty/Late W-2 Penalty: Late 1099 and late W-2 penalties get lumped together as information returns. These IRS penalties get assessed per return based on how late the tax form is how large the size of your business. Small businesses have less than $5 million in gross annual receipts and typically face minimum fines of $50 per return up to $260 per return if you fail to file the form by August 1st. And while there are maximum penalties, there are stiff, indeed. Even if your business is late on enough returns, it could face penalties of more than $500k, even if it’s just a few days late. After August 1st, your business could be hit with a penalty of more than $3 million if the failure to file includes more than 12,000 late forms. Moreover, if your business is found to have intentionally disregarding the filing deadline, it could face penalties of $530 per return with no maximum limit.
- Late Filing Penalty for 1120s: Form 1120 (U.S. Corporate Income Tax Return) also has penalties that apply to both unpaid taxes and late filings. The interest calculations for the unpaid taxes can get pretty complicated, but an underpayment penalty is often based on the “sum of the federal short-term rate plus 3 percentage points.” You can find complete information in Section 6621 of the tax code. Meanwhile, the late filing penalty for 1120s is 5% of the unpaid tax for each month—or part of a month—that the filing remains late. Your business may also be assessed a penalty for late payment of tax equal to 0.5-1% of the unpaid tax. (The maximum penalty is 25% of the unpaid tax.) You can find more information in the Instructions for Form 1120.
- Filing State Taxes Late: As you might expect, there’s a hodge-podge of different rules and penalties for filing state taxes late, both in between different states and different forms within the same state. We couldn’t possibly late out all these rules and filing forms here, but we can tell you that the thing that tends to trip up employers more than any other is state income tax withholding. To wit, you can find a state-by-state guide for income tax withholding here. (Texas, Florida, and a handful of other states make things a lot easier on employers because they have no state income tax, but that doesn’t mean there are no filing requirements or late filing penalties in these states. If nothing else, you’ll need to register your business with the state.)
Get the Software Support You Need from AMS
No matter what the situation, a modular software solution from AMS is just what you need. Our software can help prepare, report, and print/e-file form corrections and late filings. Let us help you minimize any late penalty you may have already incurred, while avoiding late filing penalty in the future. Buy your software now, download our free demo, or call AMS Sales and Information at (800) 536-1099.