The IRS has several tax payment deadlines in place, but if you are a W-2 employee, you don't have to care about them because your employer directly deducts tax from your monthly salary. But suppose you are a business owner or have a stake in a company that's a sole proprietorship, partnership
or an LLC
. In that case, you need to ensure that your company submits all the IRS forms and pays all the taxes accurately and promptly.
This group has to pay quarterly taxes on their own and is also responsible for paying the taxes of their W-2 employees. They can do this by deducting a certain amount from the employee's pay.
Like companies, freelancers, self-employed individuals, sole proprietors and independent contractors also need to do their own taxes.
So, let's say that you are a freelancer with multiple sources of income. The companies and clients must send a 1099 form to the IRS, informing all the payments sent to you for your work. You’ll also receive a copy of the 1099 forms.
During tax time, you have to pay your quarterly taxes on time. Depending on the number of clients you work for, you can receive multiple 1099 forms
from different parties.
If you accidentally miss a payment deadline, the IRS will slap you with a failure-to-pay penalty, which is proportional to the amount of taxes owed. But failing to pay is more severe than underpaying quarterly taxes
If you fail to pay before the due date, the IRS will charge you 0.5% of the taxes owed for every month you are late. But, when you don't pay, the IRS will issue a final notice of intent to seize your property ten days after the deadline., You can avoid the IRS penalty if you provide a valid reason for failing to pay on time. Valid reasons include natural disasters in your area, a death in your family or you were in a different country during tax time.
Let's say that the IRS somehow realizes that you deliberately missed paying taxes and continue to do so after multiple notices. The IRS has the authority to audit you, and if your numbers don't add up, it could lead to a civil lawsuit. You might have to pay a hefty penalty and any additional legal costs resulting from the case.