1120-S Late Filing


R

R. Pile

Client is 100% owner of an S Corp. The company is inactive; no
revenue, no expenses except for $100 a year to maintain his business
license. Taxes are, obviously, zero.

In 2008 filed an extension request late, but the actual return was
filed a couple of weeks later, along with the owner's personal 1040.

Just received a notice of an $89 late filing penalty. From the
instructions I see where this is a flat-fee penalty, unrelated to tax
due. What is the possibility and what argument can be used to abate
this penalty?
 
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H

Harlan Lunsford

R. Pile said:
Client is 100% owner of an S Corp. The company is inactive; no
revenue, no expenses except for $100 a year to maintain his business
license. Taxes are, obviously, zero.

In 2008 filed an extension request late, but the actual return was
filed a couple of weeks later, along with the owner's personal 1040.

Just received a notice of an $89 late filing penalty. From the
instructions I see where this is a flat-fee penalty, unrelated to tax
due. What is the possibility and what argument can be used to abate
this penalty?
You say "in 2008"; do you not mean the 2008 return which was filed in
2009? This year? If you're talking about the 2007 return field IN
2008, the $89 penalty is way too small for such a late filing.

But since the extension was not filed by due date, you haven't a prayer
for penalty abatement.

ChEAr$,
Harlan Lunsford, EA n LA
 
P

Paul Thomas, CPA

Harlan Lunsford said:
You say "in 2008"; do you not mean the 2008 return which was filed in
2009? This year? If you're talking about the 2007 return field IN 2008,
the $89 penalty is way too small for such a late filing.

But since the extension was not filed by due date, you haven't a prayer
for penalty abatement.



Are there any circumstances that would have prevented the shareholder from
obtaining an extension? Health issues seem to be the most commonly allowed
excuse to get some penalties waived. There may be other valid reasons to
get the penalty abated, but forgetting isn't one of them. Not communicating
with the tax preparer (you) isn't one of them either.
 
D

Drew Edmundson

Client is 100% owner of an S Corp. The company is inactive; no
revenue, no expenses except for $100 a year to maintain his business
license. Taxes are, obviously, zero.

In 2008 filed an extension request late, but the actual return was
filed a couple of weeks later, along with the owner's personal 1040.

Just received a notice of an $89 late filing penalty. From the
instructions I see where this is a flat-fee penalty, unrelated to tax
due. What is the possibility and what argument can be used to abate
this penalty?
Did the owner file on time (by the extended due date, if
extended)? If so, then I usually have some luck writing a
letter promising to not do it again, setup procedures to
remind me, etc. and point out that the personal return was
timely. Often IRS will abate the penalty. With the financial
stress in Washington, IRS' attitude may have changed.

Drew Edmundson, CPA
Cary, NC
 
H

Harlan Lunsford

Are there any circumstances that would have prevented the shareholder from
obtaining an extension? Health issues seem to be the most commonly allowed
excuse to get some penalties waived. There may be other valid reasons to
get the penalty abated, but forgetting isn't one of them. Not communicating
with the tax preparer (you) isn't one of them either.
Corporations don't have health issues, and that is the extension that
really matters here.

ChEAr$,
Harlan Lunsford, EA in LA
 
H

Harlan Lunsford

Drew said:
Did the owner file on time (by the extended due date, if
extended)? If so, then I usually have some luck writing a
letter promising to not do it again, setup procedures to
remind me, etc. and point out that the personal return was
timely. Often IRS will abate the penalty. With the financial
stress in Washington, IRS' attitude may have changed.
Good point there. Today it was announced that IRS reports collections
are down 34%! that's a one third DOWN!
Good God!
Are we in trouble yet?

ChEAr$,
Harlan Lunsford, EA
 
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K

Katie

Corporations don't have health issues, and that is the extension that
really matters here.

ChEAr$,
Harlan Lunsford, EA in LA

You also have to look at the statute to be sure there is a reasonable
cause exception to the penalty. Some state penalties are "strict
liability," i.e., if you didn't follow the rules you owe the penalty,
regardless of the reasons why. California has fallen in love with
this idea recently; the penalty for a tax deficiency over $1 million
for a corporation or unitary group of corporations (20% of the
deficiency, in addition to any other applicable penalties) has no
reasonable cause exception. This was part of the budget trailer bills
enacted earlier this year in the first effort to balance the 08/09
budget. Clearly intended to be a revenue raiser. It's retroactive to
tax years beginning on or after January 1, 2003. That's not a typo: I
mean 2003.

Katie in San Diego
 
T

Tom Russ

California has fallen in love with [strict liability penalties]
recently; the penalty for a tax deficiency over $1 million
for a corporation or unitary group of corporations (20% of the
deficiency, in addition to any other applicable penalties) has no
reasonable cause exception.  This was part of the budget trailer bills
enacted earlier this year in the first effort to balance the 08/09
budget.  Clearly intended to be a revenue raiser.  It's retroactive to
tax years beginning on or after January 1, 2003.  That's not a typo: I
mean 2003.
Wow. I wonder what sort of contingency plan for litigation the state
has. [Contingency plan? California? Be serious].

It would seem that this provision, should they try to enforce it,
would
draw an "ex post facto law" challenge. And since it seems that the
minimum penalty would be at least $200,000 there would be sufficient
incentive and funds available to make such a Constitutional challenge
economically viable.

OK, lots of tax laws end up having some retroactive component, but
those seem to be limited to the current tax year. Although I must
confess
I've never really completely understood the rationale that allows the
law to apply to actions undertaken before the law was passed. It
seems
that would be the essence of the intent of the "ex post facto"
prohibition.
But I'm not a lawyer, so I'm guessing there is some fine point that I
just
don't see.
 
K

Katie

California has fallen in love with [strict liability penalties]
recently; the penalty for a tax deficiency over $1 million
for a corporation or unitary group of corporations (20% of the
deficiency, in addition to any other applicable penalties) has no
reasonable cause exception.  This was part of the budget trailer bills
enacted earlier this year in the first effort to balance the 08/09
budget.  Clearly intended to be a revenue raiser.  It's retroactive to
tax years beginning on or after January 1, 2003.  That's not a typo: I
mean 2003.
Wow.  I wonder what sort of contingency plan for litigation the state
has.  [Contingency plan?  California?  Be serious].

It would seem that this provision, should they try to enforce it,
would
draw an "ex post facto law" challenge.  And since it seems that the
minimum penalty would be at least $200,000 there would be sufficient
incentive and funds available to make such a Constitutional challenge
economically viable.

OK, lots of tax laws end up having some retroactive component, but
those seem to be limited to the current tax year.  Although I must
confess
I've never really completely understood the rationale that allows the
law to apply to actions undertaken before the law was passed.  It
seems
that would be the essence of the intent of the "ex post facto"
prohibition.
But I'm not a lawyer, so I'm guessing there is some fine point that I
just
don't see.

Oh, I think you're quite right that the retroactivity of this penalty
is subject to challenge. I just don't think the current legislature
cares a nickel whether the penalty is constitutional or not. All they
cared about was getting the budget to balance on paper (at the time --
since then, as you probably have heard, we're about $26 billion in the
hole again). Due to term limits, by the time this gets to be an issue
in the courts they'll all be on to their next jobs (and maybe the next
one after that and then some) anyway.

Katie in San Diego
 
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If you're going to be filing your taxes late in the US just how long can a person get a tax extension for?
 

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