The due date for business income tax returns on extension is September 15. If that date has passed and you still haven’t filed a return for your corporation, partnership or LLC that is being taxed as a corporation or partnership, what are the consequences?
The short answer is this: You will probably pay for your tardiness.
The long answer is twofold:
Scenario 1 – Balance due returns.
If the business has a balance due on the return that hasn’t been paid yet, the late payment penalty and interest charge clock has been ticking since the original due date of the return (March 15 for corporations and April 15 for partnerships).
For corporations and LLC’s being taxed as a corporation, the tax had to be paid by March 15 to avoid these charges. For partnerships and LLC’s being taxed as a partnership, the tax had to be paid by April 15 to avoid these charges.
In addition to late payment penalty and interest, you can also be charged a late filing penalty if you did not file an extension and then file the return after the original due date, or if you did file an extension but then file after the extended due date of September 15. (More on that below.)
Scenario 2 – Zero balance due returns.
Typically, only regular corporations have tax liability on their corporate income tax returns (Form 1120). S Corporations (Form 1120S) and partnerships (Form 1065) usually have no income tax liability on their income tax returns because the profit “passes through” to the owners’ personal income tax return and the tax gets paid there.
So if there’s no tax, aren’t S Corps and partnerships off the hook if they file a return late? Unfortunately, no.
There is a penalty for not filing a return on time. As mentioned above, there is a late filing penalty even when there is no tax due. The penalty is $89 for each month or part of a month the return is late (up to 12 months), multiplied by the number of shareholders/partners/members in the business during any part of the year for this return. Ouch!
Example: you have an S Corp or partnership or LLC that has 3 owners. You filed the extension and so now the return is due September 15. But you’ve all been busy and the return didn’t get filed by September 15. Automatically, even if you file on September 16, you’ve already incurred a late filing penalty of $267 ($89 times 3).
And for every month that passes without the return being filed, you are penalized another $267. Another ouch!
Well, do I have your attention now? I hope so. If you haven’t filed the return yet, do yourself a favor and save yourself hundreds of dollars and get the return done ASAP.
Is there any way to avoid paying these late payment penalties, interest charges, and late filing penalties? Yes. If the late payment or late filing is due to “reasonable cause”, you can attach a reasonable cause statement to the return and request the IRS to waive the penalties and interest.
What is “reasonable cause”? There are several situations that usually qualify, such as death in the family, serious illness, theft, and natural disasters.