ABC Taxes, Tips & Tools

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 15^th of the third month after the close of the fis­cal year for fiscal-year S-corporations.
• If the 15^th 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.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice.  Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.