S Corporation Tax Returns Requirements & Penalties

 

Because the penalties for timely filing a required S Corporation Tax Return, Form 1120S are steep, the following information will help you avoid expensive, and very often unexpected IRS penalties.

 

 

S Corporation Tax Return Filing

 

An S Corporation is REQUIRED to file Form 1120S for EACH tax year that the election to be treated as an S Corporation is in effect, REGARDLESS of whether the S Corporation has taxable income for that year.

 

Form 1120S is due on or before the 15^th day of the 3^rd month following the close of the tax year, (March 15^th for a calendar-year S Corporation).

 

An S Corporation may obtain an automatic 6 month extension of time to file Form 1120S by filing Form 7004 on or before the due date of its tax return.

 

AN S Corporation must provide EACH shareholder a copy of the information shown on Schedule K-1 that is attached to Form 1120S. Schedule K-1 must be provided on or before the day the S Corporation files Form 1120S.

 

Failure to File Penalties

 

An S Corporation that fails to timely file Form 1120S (or files an incomplete tax return) is liable for a penalty of $195 PER SHAREHOLDER , PER MONTH for a maximum of 12 months, unless reasonable cause is shown.

 

Reasonable cause depends on the facts and circumstances of why the tax return was filed late and is the responsibility of the S Corporation Shareholder(s) to prove to the IRS. Examples such as the death of a shareholder or a shareholders family member, a natural disaster, a major illness or disability, a bona-fide financial hardship, destruction of business records, etc. may allow the IRS to forgive or reduce late filing penalties.

 

An S Corporation may also be subject to penalties for failure to furnish Schedules K-1 to its shareholders, unless reasonable cause can be demonstrated.

 

 

This article was written by Donald M. Scherzi, CPA, CFP, LLC
Mike Lupo, SCORE Counselor
Visit us at: www.scoresouthflorida.net