5 reasons to knock out your taxes this week
6 min read
March 14, 2023 • Block Advisors
The tax filing deadline for 2023 is Tuesday, April 18, 2023. That may seem a way off, but there are some advantages to getting a move on when filing your taxes. If you’re feeling overwhelmed, you’re not alone. It’s completely normal to feel overcome at the prospect of wading through the tax filing process as a small business owner, entrepreneur, or creator.
Block Advisors is here to encourage you to complete your 2022 tax filing sooner, rather than later. Below are five excellent motivators to meet with a Block Advisors tax professional ASAP to get your tax season started.
Table of Contents
- #1 Stabilize your company’s cash flow
- #2 Streamline financial planning
- #3 Prevent or recognize identity theft
- #4 Start your year on the right foot
- #5 Delaying can cost you and your business
- Get small business tax assistance year-round
#1 Stabilize your company’s cash flow
Doing your taxes is crucial to your business’ year-round financial health and can provide insights into your estimated taxes for next year. The impact of being able to predict future cash flow is clear when it comes to business and personal finance decision-making.
If you start your taxes early in the season, you are more likely to finish them on time. Plus, if the IRS happens to owe you a refund, you’ll be able to claim those funds earlier. This may help your cash flow position in the early part of the year.
Even if you find out that your business will have a balance due after filing taxes early on, those extra days to make the payment can make cash flow planning a little easier.
#2 Streamline financial planning
Completing your tax filing is also a critical piece of finalizing your tax record if you plan to grow your company in the future or apply for personal or business loans, mortgage loans, or financial aid. Financiers often ask business owners to provide copies of their tax returns as proof of income to qualify.
Self-employed individuals and independent contractors are especially likely to receive a request like this since they lack W-2 Forms and pay stubs to verify their taxable income. For employers of contractors, read more about other forms you may need to bring to your tax appointment, like IRS Form 1096 or Schedule SE.
#3 Prevent or recognize identify theft
Filing your taxes promptly protects your identity. Someone else may try to file using your TIN or EIN if you haven’t filed. It happens more than you might think. In recent years, the number of federal income tax returns with confirmed identity theft has ranged between approximately 600,000 and 1.4 million returns according to the IRS.
Finishing your filing sooner this tax season may prevent this from taking place or provide you a heads-up to start the recovery process if someone attempts to steal your identity.
#4 Keep your small business records, reporting, and goals on track
If your entity is structured as a pass-through business, partners and S Corp shareholders are unable to file their personal returns until the business return is filed. Holding off on your business return can keep you and your company stuck in the past tax year.
Furthermore, completing your filing gives you a good snapshot of your business finances from your Profit and Loss statement (See: How a profit and loss statement provides business insight). When you have a complete understanding of your business books, you are empowered to focus 100% of your attention on the future of your company.
Lastly, having a tax form record can be important for moving forward in personal matters. You may need to share your business and personal income tax records during divorce, child support, or other types of hearings.
#5 Delaying can cost you and your business
You probably know it can be costly to skip out on filing your business taxes.
What happens if you can’t make the April 18 tax deadline? Ideally, you should take the necessary steps to submit a filing extension using IRS Form 4868 or IRS Form 7004. Then it’s wise to make a good-faith payment towards your estimated taxes or set up a payment plan. Even if you had every intention of turning in the paperwork and paying what you owe on time if you miss the April 18, 2023 tax deadline you may be subject to some hefty consequences. Namely, penalties and interest.
The IRS will assess a Failure to File Penalty if you missed the filing deadline and did not request an extension. The penalty is 5% per month of your unpaid balance, to a maximum of 25%. There is also a Failure to Pay Penalty of 0.5% per month (to a maximum of 25%) of the unpaid balance. Interest is charged at the federal short-term interest rate plus 3% (the interest rate on underpayments is 7% for the Q1 of 2023).
Note that the monthly late filing penalty is 10 times higher than the late payment penalty (5% vs. 0.5%) – another reason to file as soon as possible if you miss the deadline and don’t request an extension, even if you can’t pay the balance due just yet. If you make arrangements with the IRS to pay your balance, such as through an installment agreement, the Failure to Pay Penalty drops to 0.25% per month. The best bet is to avoid this by completing your taxes long before the deadline. But if that is not possible, Block Advisors can work alongside you to set up these arrangements with the IRS.
Think you don’t need to file an individual income tax return this year because you’re not expecting to owe Uncle Sam? You might want to think again. The IRS can assess non-filing penalties on corporations and partnerships that don’t file returns, even if the business does not have a balance due.
According to the IRS, taxpayers potentially lose close to $31 billion in assessed penalties each year. Around $7 billion of that is levied against individual taxpayers and others for failure to pay. Read more about how to address IRS penalties on your business return.
Get small business tax assistance year-round
At the end of the day, the longer you wait to file your business return, the more you risk being subject to pricey penalties and interest. Plus, it means waiting longer to secure every tax credit and deduction available with the help of your Block Advisors tax pro.
It’s best to address tax return filing as soon as possible to keep your business bookkeeping on track and optimize your tax position for the calendar year. Don’t wait to file your taxes this season.
Connect to a Block Advisors certified small business tax pro in your neighborhood for help starting your taxes this week.