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S Corporations and IRS Penalty Charges

Wednesday, November 30, 2011
Are you the business owner of an S Corporation? Or, perhaps you’re thinking of starting an S Corporation or changing over your present business to this status. For S corporations, there are some IRS regulations regarding particular filing and due dates, or S Corporations can be faced with IRS penalties. Avoiding IRS Penalties All S corporations must file the IRS form 1120S by March 15th after the fiscal year of the business with the government and, if required, with the state. Also, if the S corporation had shareholders, it must file Schedule K-1 for each one. Shareholders must receive a copy of Schedule K-1 from the business, as well. If forms 1120S and Schedule K-1 are not filed by the due date, even if there were not taxes due, the S corporation will suffer IRS penalty charges. Also, if the S corporation makes mistakes on the forms, such as inadequate information provided or if any forms are omitted, the IRS considers these filing late, resulting in IRS penalties. Added to these penalties are recurring interest charges. How Much is the IRS Penalty Charges? MyTaxAttorneys will forewarn you that the IRS penalty charge for S corporations that file faulty or late tax returns and/or not filing the proper supplemental schedules are based on if the S corporation owes taxes or not. IRS penalties for S corporations have more than doubled just in the past several years. For the tax years up to 2009, the IRS penalty for late returns was $89 per month (or part of a month), per shareholder and doubles with each month until the tax is paid. Since 2009, the IRS penalty for late S corporation returns has gone up to $195 per month (or part of a month) per shareholder. And if tax is due, the IRS penalties increase even more. S corporations are required to submit schedule K-1, even if no taxes are due. But IRS penalties will be assessed if this form was late (or faulty) or if it is not provided to each shareholder within the S corporation. The IRS must have a copy of each of your schedule K-1 that was provided to each shareholder. The IRS penalty for late filing of the schedule K-1 is $50 per schedule per month (or part of a month) for up to 5 months. This penalty increases to 10% or doubles (whichever is more) if the IRS judges that filing late was intentionally done. Added to these IRS penalty charges are monthly interest charges which vary from quarter to quarter and can range from 3% to 4% or more. Answers for filing Your S Corporations Correctly S corporations should properly fill out all the forms and schedules and correctly report all income. This can be an assiduous task. You must pay attention to every line and question on the forms, or you could be subject to an IRS penalty. If problems do arise, and you feel you may be running late with your filing, you can contact a good tax lawyer who can assist you with filing an extension. MyTaxAttorney lawyers are very experienced with the IRS tax regulations regarding S corporations and have a high performance and success with helping businesses who face a variety of tax needs. IRS Resources – IRS Penalty Abatement Do you want to know what IRS penalty abatement is? Read the instructions for the relevant IRS Form 843, Claim for Refund and a Request for Abatement to get more information. Searching on Google can give you answers to IRS penalty abatement laws by state. Visit the Beverly Hills Bar Association as well.