Tax Court Upholds Failure to File Penalty Against “S” Corporations

Posted on April 07, 2015

If you own an “S” Corporation, your annual Form 1120S tax return is due on or before March 15 of the following year. You can ask for a six-month extension of time to file the tax return IF you filed before March 15, pushing the extension due date to September 15.

In a recent case, the taxpayer filed his 1120S tax return (U.S. Income Tax Return for a S Corporation) for 2010 and 2012. The IRS then assessed failure to timely file penalties against the corporation. The taxpayer attempted to persuade the IRS to abate the failure to timely file penalties in an IRS Administrative Hearing, without success.

The taxpayer then filed a Petition in the United States Tax Court alleging that he timely filed an extension of time to file the tax returns and that his failure to file was based upon reasonable cause. The taxpayer did not have any proof that he timely filed an extension and the IRS’ records indicated that no extension of time to file was ever filed.

In holding for the IRS, the Tax Court noted that the taxpayer had consistently filed his tax returns late in the past and did not consistently file extensions of time to file his prior tax returns. The Tax Court also held that the taxpayer did not possess any factors that would support a finding of reasonable cause related to the late filed tax return for 2010.

We always recommend that any documents you file with the IRS, including your tax returns and extensions of time to file, should be filed via certified mail, return receipt requested. In this fashion, you have proof that you filed your tax return or extension. Most taxpayers simply put a stamp on an envelope when filing their tax return or their extension of time to file, which is a mistake. Always use certified mail, return receipt requested, when filing your tax returns or an extension of time to file.

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