There are multiple reasons why people might not file tax returns for their business. They might wrongly assume that so long as they filed their own tax return, the business aspect is unnecessary.
Some people don’t file tax returns because they don’t owe any money or report a net loss for the business that year. There are even some people who avoid filing their taxes because they know they owe money and think they can hide that fact from the Internal Revenue Service (IRS).
Regardless of the reasoning behind someone not filing the proper tax paperwork for their company, there can be consequences when the IRS realizes they don’t have returns for the business. If you haven’t filed your returns yet, it’s time to correct that oversight and bring your business into compliance.
If you take the first step, you could avoid some penalties
As a general rule, the IRS assesses significant penalties against businesses and individual taxpayers who don’t file their taxes and don’t pay the full amount by the due date. However, mistakes and oversights do happen.
If you erroneously thought you did not need to file a business return and have only recently realized you made a mistake, being proactive and taking the first step by filing the returns now could put you in a better position when dealing with the IRS.
You can then use your decision to correct the mistake as evidence of a lack of intent. Some of the fees and penalties associated with business tax returns are discretionary, which means that if you have a compelling case, the IRS could waive those charges.
Be ready to negotiate if you can’t pay taxes owed up front
The IRS will generally take whatever enforcement actions that it deems necessary to secure the full amount of taxes owed. If the IRS notices the issue before you do, they will likely create substitute tax returns for your company.
You will need to be ready to submit your own variation of the tax returns that give you more benefits than the IRS version. Additionally, you may want to secure help so that you can negotiate with the IRS in order to minimize the impact of those unfilled returns and the currently due taxes so that you quickly come back into compliance with tax law.