has anyone had success in having this penalty abated when the shareholders timely filed their personal returns with S-Corp k-1 income included ?

asked 25 Nov '09, 19:14

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edited 29 Nov '09, 01:52

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TaxQueries ♦♦

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I have had good luck with having the penalty waived by phone as the third party designee/preparer, if

  1. The shareholders' individual returns are timely filed
  2. The corporation has never had the penalty waived before (easy since this is the first year of the penalty)
  3. The corporation does not have any unfiled returns and
  4. The corporation does not have a history of late filing

The IRS is being reasonable since this is the first year of the penalty. Next year probably not!


answered 26 Nov '09, 17:02

PStampley's gravatar image

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Great news! Next year it will solely rest on the "reasonable cause standard"!

(26 Nov '09, 17:54) Brent Berkman

The late filing penalty with no tax due is $89 for each month, or part of a month, up to twelve months multiplied by the number of shareholders included in the tax return, for filing after the due date, including extensions.

However, if the failure is a result of "reasonable cause", the instructions provide that an explanation should be attached to the tax return.

For the current situation, if no explanation was attached to the filed tax return, submit the explanation via correspondence in order to meet the "reasonable cause" exception.


answered 25 Nov '09, 23:25

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Brent Berkman
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Yes, in the past this could be waived if the S Corp taxpayers could demonstrate they had a small s corp, ten or fewer shareholders, their returns were timely filed and the K-1 income was reported on time. Lately though the government has changed standards, however a waiver is still a good possibility if you can demo it was. Go to this website for further discussion. http://pdxcpa.wordpress.com/2009/01/22/s-corporation-failure-to-file-penalty/


answered 26 Nov '09, 23:44

a%20tax%20pro%20jeffrey%20rosan's gravatar image

a tax pro je...
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Bad news campers, thanks to HR4538 both the partnership and S-Corp late filing penalty will be going up to $195 per share holder/partner per month (max 12 months) for tax years starting after 12/31/2009. This means file your extentions timely, file your returns timely. As of Now Rev Proc 84-35 has not been amended/ extended to cover small s corps.


answered 05 Dec '09, 07:01

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irs employee
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TY IRS. I still file timely the extensions but will just have to "fire" those who don't give me information I think :)

(05 Dec '09, 20:56) SandySea

Generally if the stockholders reported the income from the K-1 and paid all taxes on a timely filed return, the IRS has been pretty accomodating in abating this penalty - at least the first time or two. After that they tend to tighten up a bit.


answered 29 Nov '09, 23:12

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I have had 100% success in having the penalties abated for the late filing of an S Corp. I just write a letter to the IRS, plead on the IRS' mercy and promise that the client will never file late again.


answered 09 Dec '09, 20:14

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Kelly P
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I have not had a penalty for the S-corp returns filed late as they are pass through. Since it is pass through, only individual state(s) will assess a late filing penalty, not IRS.

How did the k-1's get issued without the corp return filed? Was it just an oversight to file the return?


answered 25 Nov '09, 19:53

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I am trying to use Rev. Proc.84-35. It really only applies to partnerships, but the penalty and logic is identical.


answered 17 Nov '10, 14:43

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Travis 1
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We have an S corp and are filing for an extension which means we will have until sept to file our return and our K-1's to the shareholders. However, how do the shareholders file their taxes timely without the K-1?


answered 11 Mar '11, 20:43

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They can't Paula...or they can but they will have to amend their taxes. They also could file for extensions, but if they are s/h's that don't want to wait if they are planning on filing timely, etc. then it is a good idea to file timely or at least b4 the S/H's filing deadline.

(11 Mar '11, 21:36) SandySea

Penalties apply if a partnership or corporation failed to get an extension, or filed after 9/15, even if they file by 10/15. However, Rev. Proc. 84-35 now applies to partnerships and S corps. Therefore, you should get a waiver with 10 or less owners if they file personal returns on extension, by 10/15. That makes 9/16 to 10/15 RUSH time for public accountants.


answered 02 Oct '11, 11:21

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Asked: 25 Nov '09, 19:14

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Last updated: 13 Mar '12, 19:13