If you have to pay late here’s what you need to know.

While it’s best to pay all of your sales taxes on time or as soon as possible sometimes businesses can’t do it. However the sooner you pay and the more you pay the less interest and penalties you owe.

This article discusses when federal income tax is due how and when to pay unpaid penalties and some payment options.

Key Takeaways

  • Interest and penalties may apply if a business does not pay federal income tax by the due date.
  • Businesses may also be penalized for underpaying tax if they do not pay their estimated taxes on time.
  • The IRS has several ways for businesses to repay their taxes over time including one-time payments and installments.
  • Generally speaking the more you pay and the sooner you pay the less you will have to pay.

Federal Income Tax Due Dates

The IRS sets tax filing deadlines for each type of business law. The filing date is also the payment date.

The deadline for small businesses to file business tax as part of their personal tax on Schedule C is the same as the April 15 deadline for personal tax returns.

Partnership income tax returns are due on the 15th day of the third month following the tax year end date. For partnerships whose tax year ends on December 31 the deadline is March 15 of the following year. 1

Corporate income tax returns are due on the 15th day of the fourth month following the end of the business tax year. For companies with a tax year of December 31 the deadline is April 15.2

The S corporation income tax return should be filed by the 15th day of the third month following the end of the tax year. For S corporations with a December 31 tax year the deadline is March 15.3

The due date of a limited liability company (LLC) return depends on the number of members (owners):

  • Single-member LLCs are paid as sole proprietors under Schedule C until April 15.
  • A multi-member LLC is paid as a partnership with a typical due date of March 15.

These deadlines may change in specific years. If the due date falls on a weekend or holiday the due date is the next business day.

Individuals and businesses may automatically receive an extension of six months when filing their tax returns. But no deferred payments. Even if you have an extension you must pay by the original due date.

Penalties and Interest for Non-Payment

The IRS imposes penalties and interest on taxpayers and businesses that don’t pay their taxes online or at all.

Failure to Pay Penalties

The IRS assesses penalties for not paying taxes by the due date based on how long the tax has been overdue. The IRS requires that taxes must be paid during the year by withholding taxes from income or other payments or by paying quarterly estimated taxes.

If small business owners don’t pay enough for a year they can be fined even if they have a refund. If a company doesn’t pay its estimated tax on time it can be fined.

Interest on Unpaid Taxes and Penalties

Interest may be charged on the penalty and the balance you owe will be calculated from the due date.

If you receive an underpayment notice you will not be charged interest on the amount shown if you pay in full on or before the payment due date. Depending on the formula used by the IRS interest rates may change quarterly. 4

Other Penalties

Other sales tax violations may be subject to additional penalties:

  • Failed to file your tax return if it was not filed on time
  • Penalties related to accuracy if all income is not reported or disallowed deductions or credits are made
  • Failure to file an information return (eg partnership information return)5

Interest on Underpayments and Penalties

Interest may be charged on the penalty and the balance you owe will be calculated from the due date. If you receive an underpayment notice you will not be charged interest on the amount shown if you pay in full on or before the payment due date. Rates may change quarterly depending on Formula 4 used by the IRS

If you haven’t paid your tax bill the IRS will send you a notice or letter explaining why you should be contacted and instructions on how to handle the issue. The IRS will never contact you by phone text social media or email to ask for payment.

If Payment Still Isn’t Made

The IRS has other more severe tax repayment remedies. Including tax liens and levies.

Taxation is the legal seizure of property to pay off tax debts. An example of taxation is withdrawals from a business owner’s bank account or other financial account.

A tax lien is a public document filed with the court to remind creditors that the IRS has a legal right to property.

In both cases the IRS assesses liability and sends taxpayers a notice and payment request. For a lien the IRS files a public document to remind creditors of the government’s rights over the property. A lien is attached to all of the taxpayer’s assets including business property.

In addition to forfeiting your property a tax lien is a public record that affects your credit report. Taxation is private and does not affect taxpayers’ credit reports.

Alternatives to Payment by the Due Date

Here are some alternatives to pay the full tax you owe by the due date.

Get a Short-Term (120 Day) Extension

The short-term deferral gives taxpayers up to 120 days to pay taxes and interest on less than $100,000. No fees will be charged but late fees and interest will be charged.

Pay by Agreement or Installment

You may be eligible for an installment payment plan offered by the IRS. This option depends on how much you owe. The IRS has an online payment agreement that you can use to pay your taxes in installments. To see if you qualify for such an agreement go to the Online Payment Agreement page and Take a few minutes to learn about online tips. Online Payment Agreements are only published on the web at certain times and on certain days.

Apply for an Offer in Compromise

The IRS recognizes that financial hardship may prevent someone from paying taxes. In these cases taxpayers can apply for a compromise solution to repay the tax at less than the full price. Each situation is considered on its own merits. This option should only be as a last resort. The IRS has a compromise qualifier offer that you can use to see if you’re eligible to apply.

Frequently Asked Questions (FAQs)

What should I do if I cannot pay property taxes for my business?

Property taxes are paid to counties in the United States and are governed by state law. You must pay the property tax collector (not the property tax assessor who assesses the property).

If you are unable to pay property taxes you may have to pay interest on the unpaid balance. Some states do not allow partial payment of delinquent real estate taxes but your state may allow installment plans. 6

If you are unable to pay property tax contact your local property tax collector to find out what to do. You may also want to contact your state tax agency for more information.

Can I go to jail for not paying sales tax?

Individual taxpayers can face criminal prosecution and possible imprisonment if convicted of:

  • Intentionally failing to submit returns supply information or pay taxes due
  • Fraud or false statements
  • Preparing and filing a fraudulent return
  • Identity theft or
  • Tax evasion7

There is a difference between tax evasion and tax avoidance. Tax avoidance is actions taken by taxpayers to alleviate their tax obligations such as making authorized deductions and tax credits. On the other hand tax evasion is the deliberate failure to pay or underpayment of tax. 8

Tax evasion is a felony because it is willful and penalties include fines of up to $100,000 and imprisonment of up to five years or both. Since tax evasion is a federal crime that means federal prison. 9

What if you owe sales tax?

Your best bet is to call the IRS. If your business is a corporation S corporation or partnership you can use an IRS company number. If your business income is included on your personal tax return please call a personal phone number.

You can also check out this article on how to apply for a payment plan online for information on how to qualify for a personal or business plan as well as the information and process you need to apply. You must create an account with the IRS to apply.