Starting in 2010 the late filing fee for Partnership returns (Form 1065) and for S-corporation returns (Form 1120S) is increasing. The previous monthly penalty was $89 per month (or part of a month) per shareholder or partner; it is now more than doubled to $195 per month per partner or shareholder. The penalty can be charged for up to 12 months, which is a pretty hefty price tag for not filing a tax return.
The penalty may be abated it the partnership or S-corporation can show the failure to file time was due to a reasonable cause. There are procedures to address these penalties assuming the entity is domestic, has a small number of partners or shareholders, and the individuals in question are natural persons who have reported all their income from the business with timely filed tax returns and this failure to file timely is not an ongoing problem. If the partnership or S-corporation has made a habit of failing to file, do not expect penalty abatement.
Really, the easiest way to handle this issue is not to file late in the first place. For many S-corporations and Partnerships no tax is due; these forms are information returns that tell the individual partners and shareholders their distributive share of income and expenses.
- Partnership tax returns are due April 15 for calendar-year partnerships
- OR the 15 of the fourth month after the close of the fiscal year for fiscal-year partnerships,
- S-corporation tax returns for calendar-year S-corporations are due March 15
- OR the 15th of the third month after the close of the fiscal year for fiscal-year S-corporations.
- If the 15th falls on a weekend or bank holiday the due date is the next business day, therefore in 2010 the S-Corporation tax return is due March 15, 2010 for calendar-year S-corporations.
Like other tax returns a taxpayer can file a form to extend the time to file, but all taxes are due on the day the tax return is initially due, which means the partners or shareholders will have to estimate their tax liability including income from the S-corporation or Partnership without falling short in order to avoid the failure to pay penalty along with interest. Form 7004 can be to file for the extension to file Form 1065 or Form 1120S. The Form 7004 must be filed on or before the original due date or the Form 1065 or Forms 1120S.
Form 7004 will give an automatic 6-month extension to file Form 1120S (S-corporation) returns, but will only grant a 5-month extension to file Form 1065 (Partnership) returns. In 2010 all Forms 1065, and Forms 1120S for which an extension (Form 7004) was filed will be due September 15, 2010.
As always, small business services and taxation are our business. If you need help completing your partnership tax return or S-corporation tax return or need help attempting to get your penalty abated, Please give Art & Business Consulting a call. We would love to engage you as a client.
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