ARE 1120S SHAREHOLDERS SUBJECT TO LATE FILING PENALTY IF RETURN FILED BY PROPERLY EXTENDED DUE DATE?
taxguy623- The IRS has started actively assessing a late filing penalty to the corporation which is based on how many shareholders the corp has and how many months the return was filed late. The penalty is $89 per shareholder per month up to 12 months. I have seen 2 of them this year. In one instance the taxpayer never looked in the envelope when he picked up the return to see that there was something to sign and send. In the meantime, he filed his personal timely using the info from the K-1. We requested a one time waiver. He had never been late before.
In the other instance the taxpayer had an extremely bad year and trying to obtain the information to complete the tax return went beyond the extension time. We did the same for him, asked for a waiver.
Both of these taxpayers were late but both account histories showed timely returns and because of circumstances, we requested the waiver. We are waiting to hear.
You are correct, and by the way, the penalty has been increased starting this year.
, Sultan of SnarkAll Star
I don't think I agree. If a 1120S or a 1065 files late, but all the partners receive their K-1's and file their 1040s by their own extended due date, a late filing penalty will be assessed against the late filing entities. The 1065 penalty will be waived once proof is submitted that the partners involved filed timely 1040s. For whatever reason, S Corps are not subject to this relief provision.
EDIT: I'm having trouble understanding the question. If an S Corp files a timely extension, is it exempt from late filing penalty if it files within the extension period? Of course. That's the whole point.
They shouldn't be. Are you sure that the extension was filed? Are you sure that the return was filed by the correct extension date?
are you asking about their personal returns?????? 1120s extension would not cover their filing responsibility for their individual returns
Thanks to you all for responding to my inquiry. I am only asking about the 1120S. My understanding is that if they file an accepted extension for the 1120S, and then file the 1120S by the extended due date, the filing late penalty would not apply. Is that correct? As long as they file by by Sept 15th they do not get penalized right?
Thanks again for your responses. This tool is invaluable as are you to this community.
Increase in Penalty for Failure to File a Partnership or S Corporation Return
NOTE: This headliner is current through the publication date. Since changes may have occurred, no guarantees are made concerning the technical accuracy after the publication date.
Headliner Volume 291
March 18, 2010
IRC Sections 6698 and 6699 imposes a penalty on any partnership or S corporation required to file an income tax return if (1) the return filed is past the due date, including extensions, or (2) the partnership or S corporation files a return with incomplete information.
Section 16 of the Worker, Homeownership and Business Assistance Act of 2009, Public Law 111-92, increases the penalty for failure to file partnership and S Corporation Returns.
Section 16 of the WHBAA increases the current late filing penalty of $89 per partner or shareholder to $195 per partner or shareholder for each month (or fraction of a month) that the return is late up to a maximum of 12 months. The amendments made by Section 16 apply to returns for taxable years beginning after December 31, 2009.
Visit IRS.gov and Search WHBAA for more information.
Page Last Reviewed or Updated: March 30, 2010
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