Time passes and without realizing it, I am already days away from September 15, the last day to file my "S" corporation tax return. Between work and family matters, I forgot that six months ago I applied for an extension at the Internal Revenue Service. In addition, I requested an extension to do my personal taxes that expires on October 15 and I hope not to forget that date.

Late filing of "S" company returns can be costly.

In recent years, the IRS has penalized late filers of corporation and "S" corporation tax returns. This, despite the fact that late filing of tax returns (Forms 1120S and 1065) is due March 15. Those who receive this sanction are often couples and other small companies that have formed these business entities to provide legal protection from their shareholders.

How much is the penalty?

The penalty is calculated based on each partial month in which the performance is delayed multiplied by the number of shareholders or partners. The fine is $205 per month per shareholder or partner. Therefore, a return filed 17 days late with no taxes due could cost $ 820 in penalties to a couple married with an “S” corporation.

What you need to know

If you have an “S” corporation or other partnership, request an extension or file your tax return on time. Remember, an extension gives you six months to file and will not owe the tax until the due date of the continuous flow tax return.

If you receive a penalty, defend yourself. A well-written request to revoke the late filing penalty can be successful. Remember, the Treasury Department still receives taxes owed to them in a timely manner.

The IRS has different penalties for not filing your tax return and for non-payment or underpayment of taxes owed. To avoid an underpayment penalty, when you file a tax return extension, you must have paid at least 90% of the total actual income tax for the reporting year. This means that if you end up paying more than 10% of the total taxes due with your actual return after the due date, interest and penalties will apply.

The penalty for failure to apply is generally more expensive than the penalty for failure to pay. The penalty for not meeting the due date of the initial filing or the extended deadline is 5% of the balance due for each month, or part of a month, up to a maximum of 25%. The Internal Revenue Service (IRS) does not impose penalties both for not filing the application and for not paying during the same period. For more information visit our offices and have an excellent trip.