The Guide Business New Year Checklist

The penalty for not filing is ten times the penalty for not paying. Five per cent a month against half a per cent a month, both capped at twenty five per cent. Which means if you cannot pay, you file anyway.

Almost nobody knows that ratio, and it is the single most useful thing on any January list. The extension available to individuals is six months for filing and expressly not for payment, so the two obligations come apart and the cheap one to keep is the filing. What follows takes the penalty structure from the statute and the extension mechanics from the regulation, then turns to the rest of the winter work. Dollar figures here get adjusted year to year: check the operative amounts with an accountant before you act on them, and treat none of this as tax advice. The other seasonal lists sit under the running the business hub.

What is the failure to file addition?

Five per cent a month, to a cap.

Section 6651(a)(1) of Title 26 provides that in case of failure to file a required return on the date prescribed, determined with regard to any extension of time for filing, and unless it is shown that the failure is due to reasonable cause and not to wilful neglect, there shall be added to the amount required to be shown as tax five per cent of that amount if the failure is for not more than one month.

It adds a further five per cent for each additional month or fraction of a month during which the failure continues, not exceeding twenty five per cent in the aggregate.

The words fraction thereof matter, because a failure of one day into a new month attracts the same increment as a failure of thirty days.

And the reasonable cause exception is stated as something to be shown rather than assumed, which puts the burden where it sits.

Section 6651 is published by the Law Revision Counsel.

How the deadlines fall across the year is covered in the quarterly piece.

Headwaters, NC

And the failure to pay?

Half a per cent a month, to the same cap.

Section 6651(a)(2) provides that in case of failure to pay the amount shown as tax on such a return by the date prescribed for payment, determined with regard to any extension of time for payment, and subject to the same reasonable cause exception, there shall be added half a per cent of that amount for not more than one month.

It adds a further half a per cent for each additional month or fraction, not exceeding twenty five per cent in the aggregate.

Section 6651(a)(3) applies the same half a per cent structure to an amount required to be shown on such a return which was not shown, where it is not paid within twenty one calendar days from the date of notice and demand, reduced to ten business days where the amount equals or exceeds one hundred thousand dollars.

So there are three additions with two rates, and the expensive one is the one attached to filing rather than to paying.

Which is why a guide short of cash in April should file on time and deal with the payment separately.

Why a guiding business runs short in April at all is the cash flow piece.

Great Day Guiding, WI

Is there a minimum penalty?

Yes, past sixty days, and it can exceed the percentage.

The statute provides that where there is a failure to file a return of tax imposed by chapter 1 within sixty days of the date prescribed, determined with regard to any extensions, and unless reasonable cause and absence of wilful neglect are shown, the addition under paragraph (1) shall not be less than the lesser of a stated dollar amount or one hundred per cent of the amount required to be shown as tax on the return.

The statutory figure reads four hundred and thirty five dollars, and it is subject to adjustment, so the operative amount for a given year must come from the agency rather than from the statutory text.

The structure is what matters: past sixty days, a small liability does not produce a small penalty, because the floor is a dollar figure rather than a percentage.

Which reverses the intuition that a year with little tax owing is a year where late filing is harmless.

A quiet season is exactly the year that assumption gets made.

Why a quiet season still needs the paperwork is covered in the hobby loss piece.

Are the two additions charged together?

There is a coordination rule, and a netting rule.

Section 6651(c)(1) addresses additions under more than one paragraph with respect to the same return, which is why the two are not simply stacked at their full rates.

Section 6651(b) then supplies the netting. For the filing addition, the amount of tax required to be shown is reduced by any part of the tax paid on or before the date prescribed for payment and by any credit claimable on the return.

For the payment addition, the amount shown is reduced, in computing the addition for any month, by any part of the tax paid on or before the beginning of that month and by any claimable credit.

And for the notice and demand addition, the stated amount is reduced by any part paid before the beginning of the month in question.

The practical reading is that paying something reduces the base the additions run on, which is a reason to pay what you can rather than nothing.

How to hold money against that is covered in the prepayment piece.

What does an extension actually do?

Extends the filing, and expressly not the payment.

Section 1.6081-4(a) of Title 26 allows an individual required to file an individual income tax return an automatic six month extension of time to file after the date prescribed, if an application is filed in accordance with the regulation.

Paragraph (b) sets four requirements: submit a complete application on the prescribed form or in another manner the Commissioner prescribes, file it on or before the later of the date prescribed for filing or the expiry of any extension under a stated related section, file it with the office designated in the instructions, and show the full amount properly estimated as tax for the taxable year.

Paragraph (c) then states it plainly: an automatic extension of time for filing will not extend the time for payment of any tax due on the return.

Paragraph (d) allows the Commissioner to terminate an automatic extension at any time by mailing a notice of termination at least ten days before the designated termination date.

So an extension moves the cheap obligation and leaves the expensive one where it was, which is the opposite of how it is usually described.

Section 1.6081-4 is carried on the eCFR.

What the underlying records must support is covered in the bookkeeping piece.

What has to be shown on the application?

A properly estimated figure, which is a real requirement.

Paragraph (b)(4) requires the individual to show the full amount properly estimated as tax for the taxable year.

Properly estimated is not the same as left blank or guessed at, and it means the extension depends on having done enough work to produce a credible number.

For a guiding operation that means the season has to be reconciled before the extension is filed, not after, which removes most of the appeal of an extension as a way to avoid the work.

Which is the practical argument for reconciling in the autumn: an extension does not buy you out of knowing your figures.

It buys you time to file the return, having already established what it will say.

Why the autumn is the right time is covered in the fall wrap-up piece.

Does an instalment arrangement change the additions?

The statute contemplates one, and the detail belongs to an adviser.

Section 6651 contains provisions addressing the position where an instalment agreement is in effect, which is a signal that the additions are not simply fixed once a liability exists.

What a general account can say is that the possibility exists and that it is a conversation to have early rather than after the additions have run for months.

What it cannot say is what applies to you, since that turns on the agreement, the amounts and the timing.

The relevant point for a January list is therefore procedural: establish the position, ask the question, and do not let months pass while the increments accrue.

Every month or fraction thereof is a separate increment, which makes delay the one thing certain to cost money.

How to hold cash against a known liability is covered in the cash flow piece.

What if the return is simply wrong?

Different provisions, and the filing addition is not the issue.

The additions described above attach to failing to file and failing to pay, not to filing a return that turns out to contain an error.

Which is worth stating because it removes a common reason for delay: a guide unsure whether a figure is right is better off filing with the best figure available than not filing at all.

An amended return is an ordinary mechanism, and the assessment period runs from the original filing rather than restarting.

None of that means accuracy is optional, and there are separate provisions dealing with substantial understatements that this page does not cover.

It means the January decision is to file, and the accuracy question is handled by an adviser afterwards.

Why the underlying figures have to be establishable is covered in the bookkeeping piece.

What else belongs in January?

Every number you set last year and never revisited.

The day rate, decided before the winter selling period rather than during it, since a client booking in February needs a figure that will hold.

The deposit and the cancellation ladder, which should move with the rate and rarely do.

Insurance, checked for whether the cover still matches what you actually do and whether the named insured still matches who owns the hull.

Any recurring subscription or tool, reviewed for whether it earned its cost across the season that just ended.

And the calendar, opened, because the clients who plan furthest ahead take the best dates.

How the rate review should work is covered in the inflation piece.

What should be purged?

Nothing, until you know the retention period.

January feels like the month to clear out paperwork, and it is the month most likely to destroy something that was still needed.

Wage records, payroll and property documentation all sit on different retention periods, and the assessment period for a return runs from filing rather than from the year it covers.

Which means the safe January action is to label and box rather than to discard, and to check any period before anything is destroyed.

Digital records cost nothing to keep, so the only genuine constraint is physical space and the discipline of labelling.

The specific periods belong to an adviser and to the agency rather than to a general list.

How long a season stays open is covered in the fall wrap-up piece.

Which figures those records have to yield is the numbers piece.

What should be set up before the season?

The mechanisms that fail when you are busy.

A booking flow that takes a deposit without you touching it, a confirmation that sends itself, and a reminder that goes out before the trip are all winter builds and none of them get built in July.

The same applies to whatever you use to record hours, payments and incidents, since a system introduced mid-season is a system half used.

January is also when to set up the separate account, the identifier and anything else structural, because those depend on other organisations replying and they will not reply quickly.

And any recurring calendar entry belongs in now: the credential expiry, the entity renewal, the insurance anniversary and the rate review.

Four calendar entries made in January prevent the four most expensive administrative surprises in this trade.

What that account setup involves is covered in the accounts setup piece.

Who should be contacted in January?

Last season's clients, before anybody else reaches them.

The single most valuable January action is a message to everybody who fished with you last year, because they are deciding about this year now.

It costs nothing, converts better than any advertising, and it is the one task that competes directly with the administrative list for attention.

Which is why it belongs first rather than after the paperwork, since the paperwork has hard deadlines and the client message has a soft one that is easy to miss.

Referral partners belong in the same week, since a shop or lodge planning its own season is deciding who to send work to.

None of that is a campaign. It is a list of people and a short note to each.

How that message should read is covered in the season announcement piece.

What should be planned rather than reviewed?

The one change you will actually make.

A January list full of improvements produces no improvements, because a guiding season leaves no capacity for a programme of change.

One change, chosen in January and executed before the season, is the realistic version: a rate rise, a second boat, a new water, a booking system, or a proper set of records.

Whichever it is should have a date and a number attached before February, since a change with neither is an intention.

And the rest of the list should be written down as next year's candidates rather than attempted, because attempting five changes across a season delivers none.

That is the least satisfying item on any new year list and the one that most reliably works.

What the capacity decision involves is covered in the second boat piece.

What are the January mistakes?

The costliest one is the simplest.

Not filing because you cannot pay, which attracts the five per cent addition instead of the half per cent one.

Treating an extension as extending the payment, when the regulation states directly that it does not.

Filing an extension without a properly estimated figure, when showing that figure is one of four stated requirements.

Setting no rate before the winter selling period, so the first booking of the year is taken at last year's number.

And planning five changes, which reliably delivers none of them.

What the spring version of this work covers is set out in the spring launch piece.

What is the working order?

Rate first, filing second, one change third.

Set the day rate, the deposit and the ladder in the first week of January, because everything commercial depends on them and the selling period is now.

Open the calendar and publish the numbers, so the clients deciding in January have something to decide about.

Establish what you owe and when, and file on time whatever the payment position is, since the filing addition is ten times the payment one.

If an extension is right, file it with a properly estimated figure, and understand that the payment date has not moved.

Then pick one change, attach a date and a number to it, and leave the rest of the list for next year. Current penalty amounts are published on the Internal Revenue Service site.

What the industry-level view looks like is covered in the trends piece.