If you have not filed your business income tax returns in a timely fashion you should know about the failure to file penalties from the IRS. The incentive to file on time via the late filing penalty is significant. Here are the penalties for late filing of tax returns for a partnership, S Corporation, and a C Corporation.
Late Filing of Return for a Partnership
A penalty is assessed against the partnership if it is required to file a partnership return and it (a) fails to file the return by the due date, including extensions, or (b) files a return that fails to show all the information required, unless such failure is due to reasonable cause. The penalty is $205 for each month or part of a month (for a maximum of 12 months) the failure continues, multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year for which the return is due.
Late filing of return for an S-Corporation
Here is what is included in the instructions from the IRS for an S-Corporation tax return form 1120S for 2019:
A penalty may be assessed if the return is filed after the due date (including extensions) or the return doesn't show all the information required, unless each failure is due to reasonable cause. For returns on which no tax is due, the penalty is $205 for each month or part of a month (up to 12 months) the return is late or doesn't include the required information, multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation's tax year for which the return is due. If tax is due, the penalty is the amount stated above plus 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is more than 60 days late is the smaller of the tax due or $435.
Late filing of return for a C Corporation
A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is more than 60 days late is the smaller of the tax due or $435. The penalty will not be imposed if the corporation can show that the failure to file on time was due to reasonable cause.
You really don't want to be late filing your business tax returns, partnerships form 1065, S Corporations form 1120-S, and C Corporations form 1120. The late filing fees are particularly painful. However, if you have neglected to file back tax returns you probably want an idea of what your penalties will be. One of my clients came to me needing to file years of back tax returns for his business. As you can see once your business returns are over a year late the penalties are stiff. There may be a possibility of getting the penalties abated under certain circumstances, but that is a subject for another blog post.
For help filing your back tax returns and potentially representing you before the IRS and the states to work out payment arrangements for your amounts due feel free to contact me via email to arrange an appointment to discuss your situation. My email address is found below.
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Be careful when reading about tax law and its application, including my articles, because the wording and definitions are such a challenge and are influenced by writers perspective, specifically his own clients situations that he is mindful of and other situations the writer is not thinking of. The point is talk to your CPA about your situation and circumstances and don't rely on or make conclusions based on articles you read, including articles form irs.gov, because concepts and definitions are not very clear, and of course, they are subject to change. Now is the time to be having discussions about your situation and developing strategies for you and your business. Again, contact me using my information above to discuss your situation. I help business owners all over the U.S. and in foreign countries with their tax returns.