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Intentionally paying your federal tax bill late?

On Behalf of | Jan 16, 2017 | Tax Law

Most of the time, paying your taxes on time is the best strategy. The Internal Revenue Service takes a dim view of late payments and it charges interest and penalties for that late payment. In addition, you still must file your income tax return on time or request an extension, which would seem to make it beside the point, unless you cannot afford the tax.

Or, as some businesses have found if they have a unique circumstance that would necessitate the entity taking out a loan or having to resort to extraordinary means to pay the tax. Most tax preparers would still advise against it, but in some cases, it may simply be more convenient to pay a limited amount of penalties and interest in addition to the tax rather than go to the complexity of obtaining a line of credit or a short-term loan.

This may occur if your business has a timing issue with when the tax payment is due and when revenue will be received. Perhaps you have just made a large expenditure and will be short on operational cash for the next few months. If you decide to attempt this, you should check with your tax advisor and determine the potential penalties and interests.

Even if you do all of the homework, you should still think carefully and consider other potential ramifications. The IRS could place a lien on your business assets and freeze your bank accounts, which could cause significant damage to your business.

You should also consider that this should be a one-time deal. Making it a practice could invite closer scrutiny by the IRS, and if a lien were placed on your businesses’ accounts, it could complicate or damage your other business relationships and make obtaining credit more difficult.