Another Deadline

Today TaxMama wants to talk to you about filing deadlines and the consequences of ignoring them. 

Dear Friends,

Today is another of those tiresome deadlines. I’ve just come to realize that not everyone who is affected, understands the implications. So… If you opened up an LLC, partnership, corporation, etc. in 2010 and have not finalized your accounting – you still need to file a tax return. Even if you’re just not ready. 

 

Not filing means paying penalties. Non-filing penalties are usually based on a percentage of the taxes due – 5% a month. If you don’t file by September 15th, your penalty will be imposed on September 16th, effective MARCH 15th (corps) or APRIL 15th (partnerships and LLCs filing as partnerships)!

To avoid that penalty, all you have to do is file a tax return. It doesn’t have to be perfect. It doesn’t even need to be totally correct. If you just simply can’t get it done it on time – ESTIMATE. Come up with your best, and most reasonable estimate of the correct income and expense amounts. Include a statement with the tax return saying that’s what you’re doing. And that you’ll be filing an amended return very soon, as soon as you finish gathering your data.

Non-filing penalties for partnerships and S-Corps are much higher. Penalties are not based on the balance due, since these entities don’t pay taxes. They are $195 per month, per partner, up to 12 months. So, if you don’t file by September 15th, on September 16th your penalty will be $1,170 per shareholder (6 months from March 15th for S Corps) and $975 per partner for partnerships and LLCs filing as partnerships.

Incidentally, if you were running a partnership or S Corp and aren’t really using it anymore, you still need to file a final tax return. Even if you just enter a bunch of zeroes on it. You need to tell IRS you’re done. If you don’t, you’ll be facing those nasty late filing penalties. Don’t forget to tell your state as well. They have penalties, too.

And, if possible, remember to dissolve your corporation or entity. If you don’t know how, you can always ask your attorney, or the folks at Incorp.com (800.2.INCORP) to do it for you. Tell them TaxMama sent you and you can even get a discount.

And remember, you can find answers to all kinds of questions about deadlines, procrastination and confusion. Where? Where else? At www.TaxMama.com.

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6 thoughts on “Another Deadline

  1. TaxMama says:

    Hi Patrick,
    Did you get an employer ID number from the IRS?
    If you did, they don’t know that you don’t consider yourself open for business.
    Include the Schedule C with 0’s until you either dissolve the LLC or start your business.

    Good luck.

    Hugs
    Eva

  2. Patrick says:

    Hi Eva,

    I formed an LLC a couple of years ago, but I have never really done anything with it other than open a bank account. I do not have any revenue nor have I taken any type of deduction for any of my expenses incurred to date. Since I do not consider myself open for business would I still have to file a schedule C with a bunch of zeros for my LLC?

    Thanks

    Patrick

  3. TaxMama says:

    Hi Wayne,

    The penalty is based on the original due date:
    For corporations, it’s March 15th. For partnerships, it’s April 15th.
    So the penalties start in March or April – not after the extension expires.
    The extension is only good IF they file.
    If they don’t file within the extension period, it’s as if they never filed it at all.

    Sad, but true.

    Hugs
    Eva

  4. Wayne Davies says:

    Question about $195/month/shareholder late filing penalty. If an S Corp or partnership has filed an extension (Form 7004) by March 15 and fails to file the return by Sept 15, would the penalty for filing one day late be $195? Or would it be $1,170?

  5. TaxMama says:

    Hi Rosael,

    Aw thanks.

    But, shhh…let’s not tell anyone, although partnership extensions end on Sept 15, along with corps, the original filing deadline is still April 15th – See page 3 of the instructions – file Form 1065 by the 15th day of the 4th month. http://www.irs.gov/pub/irs-pdf/i1065.pdf

    They just changed the FINAL FILING deadline about 2 years ago so partners receive the K-1s before they have to file their 1040s. After all, it made no sense to have partnerships due on Oct 15 – the same day the individual’s tax return was due. Too many people were abusing that deadline and not getting K-1s into partners’ hands in time to prepare their own tax returns.

    Have a great day. See you at the Tax Roundtable.

    Hugs
    Eva

  6. Rosael Carreras-Morris says:

    Hi Eva,

    Thanks for the reminders on the penalties. Some people don’t realize how costly a day late can be. just one thing. I believe the partnership deadline without extensions is also march 15th. Am I mistaken? If so I’ve been rushing my clients the past couple of years just for the fun of watching them scramble…lol.

    Hope you have a lovely day.

    Rosael Carreras-Morris, EA

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