A new penalty for late filed S Corporations and partnership LLC’s was created starting with the 2009 tax year and continues to present.
I use this newsletter to remind taxpayers about this penalty because the penalty is severe. $195 per shareholder or partner per month up to a maximum 12 months. So, as an example, if you have a two person LLC or S corporation and you file 2 months late the penalty would be $780. If you filed 12 months late, the penalty would be $4,680.
If an extension is filed by the original due date (March 15 for S Corp and April 15 for partnership) then the partnership LLC is due October 15 of each year and an S Corporation is due September 15 of each year.
Filing a request for a federal ID # is the trigger for the requirement to file a year end return. So even an inactive S Corporations or partnership LLC must file. As long as you have a federal identification number (FID#) then you must file a return even if you do not engage in any business.
The penalties may be waived under certain circumstances. But the rules are sometimes difficult and require expert correspondence with the IRS.
The best thing to do is know whenever you create a partnership or S Corporation by filing for a federal ID #, you must file a year end return even if you do not open or have any business during the year.
Also, be aware that if you formed and applied for a federal ID# for a new business, Kallas must have the information prior to March 15 of the following year to file a timely extension for you otherwise you risk a penalty.