6 Steps for Dealing with a Late Sales Tax Return
- Jan 15, 2016 | Laura McCamy
Pop quiz: Your sales taxes were due last week and you didn’t file them. What do you do?
- Drive to your state’s revenue department and personally deliver your return along with a plate of homemade brownies?
- Get in bed and pull the covers over your head?
- Deal with the situation calmly and methodically.
If you picked #3, you are going to be just fine. You aren’t the first person who didn’t file your sales taxes on time and you won’t be the last. Whether you simply missed a deadline or you don’t have the cash on hand to pay what you owe, you can get back into sales tax compliance by facing the problem head on and taking a few simple steps.
1. Pay up
If you got busy and forgot to file, do file and pay your sales taxes as soon as you can. Some states assess interest and penalties within a few days of late filing, so the quicker you can rectify your mistake the better.
2. File your late sales tax return
Even if you don’t have the money to pay all (or any) of the sales taxes you owe, go ahead and file your return. You will still owe interest on the outstanding amount, but filing may reduce your penalties. Check the sales tax rules for your state to find out the effect of filing a sales tax return without payment.
3. Pay what you can
If you can make a partial payment, it shows you are serious about paying your sales taxes. There can be a financial benefit, too: In Pennsylvania, the penalty on underpayment of sales tax is lower than the penalty for not paying at all.
4. Pick up the phone
If you can’t find an answer online, call the customer service line for help. Like those hardworking souls at the IRS (yes, the IRS), employees at state revenue departments can be quite friendly and helpful, even if you’re calling to talk to them about how you messed up.
If you don’t have the money to pay, a personal conversation with the taxation department in your state may reveal payment options that the state doesn’t want to advertise on its website but that a representative can share with you.
5. Pay on an installment plan
The bottom line is your state wants your money. If you can’t pay it all right now, contact your state taxation department and ask for a payment plan to get you back into sales tax compliance.
6. Plan for the future
Filing your sales tax return late or coming up short on the amount you owe may be a wake-up call that it’s time to make some changes in the way you handle your business finances. You might want to get help from tax compliance software to keep you on the straight and narrow.
One best practice: Create a separate account for the sales taxes you collect, and pay what you owe out of that account so you are clear at all times on how much you owe in sales taxes and have the funds handy.