Welcome to The Deduction, Big Bird Accounting LLC’s weekly newsletter (written by Christopher Small, the founder). My goal here is simple – logical insights to save on taxes. Need help – let’s chat – https://bigbirdaccounting.com/contact

Happy Sunday!

Well, kinda happy. :) We’re getting down to crunch time on filing/paying our income taxes, and there’s no worse feeling than finding out you owe something AND not having the money to pay. So that’s what we’re talking about today. The first thing to know is that doing nothing is the worst thing you can do. The penalties for failing to file or extend are pretty harsh – if you fail to file the penalty is 5% of your tax owed PER MONTH up to 25% of your taxes owed. For example, if you owe $25k in taxes and fail to file, every month for five months you accrue $1,250 in penalties, topping out at $6,250. Not fun. What should you do if you don’t have enough? You should extend your taxes, pay as much as you can, and then make up the rest when you can. Why should you do this? Aren’t there penalties here too? You should do it because it keeps you out of the firing line of the IRS – extending gives you until 10/15 to file, though you are supposed to PAY your tax when you extend (i.e. April 15). Why does this matter then? Because the penalties are SIGNIFICANTLY lower. If you extend and under pay the penalty is 0.5% per month. So instead of $1,250 a month if you don’t file and don’t pay, it’s only $125/month – MUCH more manageable. BOTTOM LINE – make sure you extend (it’s easy and doesn’t have any adverse effects – translation = you are not more likely to get audited doing this) and then pay what you can when you can. If you have questions, reply to this email and I’ll help. And, if you’re in the market for help with your books and specific tax advice tailored to your situation, let’s chat – https://bigbirdaccounting.com. Have a great week! Cheers, Christopher Small Big Bird Accounting LLC