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1120S late filing penalty

Technical topics regarding tax preparation.
#1
utsllc  
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Hello, what are some of the reasons that the IRS may waive or reduce the penalty? The company already used a first time abatement some number of years ago.

Thank you!
 

#2
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The company already used a first time abatement some number of years ago.


How many years ago? The FTA will generally be allowed if the taxpayer was compliant for the three years prior to the penalty year.
 

#3
utsllc  
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I think they used the FTA in the last 3 years so that would make them ineligible if it's 1 year out of every 4 allowed...any other thoughts of things that have been accepted?

Only reason I ask is in the penalty letter it has a whole paragraph saying to write in an explanation for consideration.

Thanks!
 

#4
makbo  
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This won't be the response you want, but how will anyone take filing deadlines seriously if there aren't penalties? They've already gotten at least one free pass, so what else is it going to take to get them to learn? Are they children or something?
 

#5
utsllc  
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makbo wrote:This won't be the response you want, but how will anyone take filing deadlines seriously if there aren't penalties? They've already gotten at least one free pass, so what else is it going to take to get them to learn? Are they children or something?


Yes unfortunately that's not for me to judge. I already told the company owner (they are a small business 2-3 people). They have been on top of things for 8-9 years of operation except for a one time FTA use in the last ~3 years.
 

#6
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Some firms have a poor system for processing extensions and miss a few.
 

#7
makbo  
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I was assuming this was the taxpayer's fault, not the preparer. If a preparer screws up for the same client more than once in a 3-year period, then they should pay for the penalty. If the firm makes filing on time a low priority, then they should just pay the penalty, as a cost of the how they choose to run their business. Like paying a parking ticket...or like when Google or Facebook pays a billion or two for some nuisance regulation violation.
 

#8
utsllc  
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Thanks all -- any answer to the original question?
 

#9
dave829  
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utsllc wrote:Hello, what are some of the reasons that the IRS may waive or reduce the penalty?

IRM 20.1.1.3.2.2 (and subsequent sections) has a lengthy discussion of the situations that might result in reasonable cause for filing the return late. Suggest you review the discussion there.
https://www.irs.gov/irm/part20/irm_20-0 ... 8855271376
 

#10
lucyko  
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You mentioned that this is a small company with only 2-3 people . If the personal tax returns were filed on time ,including extensions , I would make a point on this on your waiver letter . Emphasize that all monies due to IRS were paid on time .

IRS will generally waive the penalty if there is "reasonable cause ". (client in hospital,death in family ,etc )

What is the real reason that the return was filed late ?
 

#11
utsllc  
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From my understanding the owner's son had some medical diagnosis that required hospitalization, emergency procedures, and so on between February and early April, which lead to missing some of the deadlines/etc.

Since this is an S-Corp the taxes are pass-through and the owner and additional shareholder all paid up by April 15 their estimates for the previous year.
 

#12
makbo  
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utsllc wrote:Since this is an S-Corp

Oh, well in that case, go and sin no more. :oops:
Last edited by makbo on 15-Jun-2019 10:34pm, edited 1 time in total.
 

#13
dave829  
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utsllc wrote:From my understanding the owner's son had some medical diagnosis that required hospitalization, emergency procedures, and so on between February and early April, which lead to missing some of the deadlines/etc.

IRM 20.1.1.3.2.2.1 (to which I provided a link in #9) states:

1. Death, serious illness, or unavoidable absence of the taxpayer, or a death or serious illness in the taxpayer's immediate family, may establish reasonable cause for filing, paying, or depositing late for the following:

    a. Individual: If there was a death, serious illness, or unavoidable absence of the taxpayer or a death or serious illness in the taxpayer’s immediate family (i.e., spouse, sibling, parents, grandparents, children).
    b. Corporation, estate, trust, etc.: If there was a death, serious illness, or other unavoidable absence of the taxpayer (person responsible), or a member of such taxpayer’s immediate family, and that taxpayer had sole authority to execute the return, make the deposit, or pay the tax. [emphasis in original]
 

#14
utsllc  
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Would a letter for this suffice and would the filer need to provide proof of the issue or just state that proof is available.

Are any of these requests increasing chances of audits or further complications (meetings, etc.)? I assume no but have no experience with this.

In other words it'd be nice to save the $800 penalty (2 months x 2 shareholders) but not worth it if it complicates matters/etc.

What have been your experience(s) -- is this normally adjudicated via mail and IRS will allow or deny it?

Thank you!
 

#15
dave829  
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utsllc wrote:Would a letter for this suffice and would the filer need to provide proof of the issue or just state that proof is available.

A letter should suffice as long as it contains detailed information. As stated at IRM 20.1.1.3.2.2 (I provided the link in #9 above):
a. Taxpayer’s Reason: The taxpayer’s reason should address the penalty imposed. To show reasonable cause, the dates and explanations should clearly correspond with events on which the penalties are based. If the dates and explanations do not correspond to the events on which the penalties are based, request additional information from the taxpayer that may clarify the explanation.

utsllc wrote:Are any of these requests increasing chances of audits or further complications (meetings, etc.)? I assume no but have no experience with this.
In other words it'd be nice to save the $800 penalty (2 months x 2 shareholders) but not worth it if it complicates matters/etc.
What have been your experience(s) -- is this normally adjudicated via mail and IRS will allow or deny it?

I doubt that it will result in an audit. The IRS normally resolves this via mail. I can't tell you if the IRS will allow or deny it because my crystal ball is at the cleaners right now. If the IRS denies the request, you can appeal.
 


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