CPA Teaches Tax Payment And Filing Responsibilites
CPA Teaches Your Tax Payment/Filing Responsibilities
Paying Your Taxes/Extensions…The IRS Requires us to Pay as We Go
Since World War II, the IRS has been a pay as you go system. Prior to that time, the IRS simply collected their monies at the end of the year when one’s annual tax return was filed. Many entities by virtue of their tax treatment as flow through entities do not pay any income taxes when the returns are filed but rather the income is communicated to the partners via a K-1 which is a part of the return. The entity’s partners are then responsible for reporting their portion of the earnings on their personal/appropriate returns. Thus there are many entities such as Partnerships, LLC’s, LLP’s, an S Corporations for which no income taxes are due when these returns are filed.
C Corporations are responsible for paying their taxes as they go and they do not have the ability to pay all of their taxes at year end and still avoid assessed penalties and interest. Thus, it is critical to tax plan several times a year to determine the ultimate amount of year end liability due and to take appropriate measures to plan accordingly. For S Corporations and individuals we suggest that you tax plan at least twice annually. At that time it is also advantageous to review a client’s internal finances and obtain their projections of profits for the rest of the year. By utilizing this information as well as by being aware of their personal return issues, itemizations, exemptions, etc. you are able to get an estimate of what your taxable income and your tax will be.Both the IRS and states require you to pay as you go thus requiring you to pay enough in estimates for the taxes due on the profits/taxable income generated. However payroll withholding has the added incentive that by tax law is deemed to have been statutorily paid evenly throughout the year, making only the settlement of your year-end taxes the IRS and state’s concern rather than every individual quarter.
Extensions are a legal way of notifying the IRS that you plan to file your return after the original due date. Both C and S Corporate returns are due March 15th of each year or two and a half months after year end. Personal returns, Partnerships, LLC’s, and LLP’s are generally required to be a calendar year return and are due April 15th of each year or three and a half months after year end.The IRS allows a six month extension for both Corporate and Personal Returns, however please note that this is solely an extension of time to file and not an extension of time to pay and any late payments will result in assessments from both the IRS and state for penalties and interest. Please be advised that the penalties are even worse if you do not file the extension or the original return by the due date. These incentives are simply in place to give you time to file and pay. The Corporation and Personal extensions are for six months and accordingly expire on September 15th and October 15th respectively. There are no valid extensions available after this date.