The last couple of years, the IRS has been penalizing late filers of Sub S Corporation tax returns. This despite the fact that late filing of the Sub S tax return (1120S), due March 15th, often does not impact the receipt of the taxes due on April 15th. Those that are getting this “gotcha” penalty are often couples and other small firms who have formed a Sub S Corporation to provide legal protection for their small businesses.
How much is the penalty?
The penalty is calculated based on each partial month the return is late times the number of shareholders. So a return filed 17 days late with no tax due could cost a married couple with an S-Corporation $300 to $400 in penalties!
What you need to know
If you have a Sub S Corporation, or other flow through entity for that matter, either file an extension or submit your tax return on time. Remember, an extension gives you six months to file and you do not owe the tax until the flow through tax return due date (typically April 15th).
If you receive a penalty, challenge it. A well worded request for reversal of the late filing penalty can be successful. Remember the Treasury Department is still receiving the taxes owed to them on a timely basis.
For more information, contact Gilliland and Associates for your IRS questions today.