There is much controversy over the current spending patterns of our federal government. Due to the many bailouts and many other reasons, our national throughput is at an all time high and increasing every minute. This has led the IRS to look for ways to collect money and to change its practices to generate income. One major change we are seeing is that the IRS is examining all of the laws on which they have not been as "strict" in recent years and finding ways to cash them in.
The IRS is changing its practices by applying late penalties for filing information returns. An information return is one that is filed with the IRS, but without tax. S, LLC, and partnership income tax returns are all information returns because they pass through entities, and taxes are paid by the owners of the entities on their personal income tax returns. Thus, these statements simply report to the IRS or inform it about the entity's revenues and expenses. Also included with the information returns are the IRS copy of 1099 forms and W-2 forms. So if you don't file them on time, the IRS will fine you.
In the past, if you filed a late information return, you may or may not receive a penalty. The application of the delay penalty was quite inconsistent, even though IRS rules provide a penalty for late filing, and so far it has not been strictly enforced. Most of the time, we could just write a letter and get the penalty canceled. The IRS has noticed that this penalty has the potential to bring in millions of dollars in revenue, not only are they sending more penalty letters for late filing, but they have increased the penalty from $ 400 per month per owner to 1,000 $ per month per owner, and they don't waive the penalties.
So what does this mean for you if you file a late entity return? Let's say you have an LLC with 3 members and file 3 months late. You will now receive a penalty of $ 9,000. ($ 1,000 x 3 owners x 3 months = $ 9,000 late penalty) It makes you want to deposit on time – doesn't it?
Remember that corporate tax returns are due March 15 and that LLC and partnership returns are due April 18 this year. If you need help filing an extension, let your accountant know a week before the due date so that he can confirm that the extension has been filed and accepted. With the increasingly stringent IRS, they need this documented evidence of extensions and filings.