Given the uncertainty floating around right now, the due date for these S Corp and Partnership returns may change. Regardless, Tom gives some great tips and ideas for making the best of things. Give it a watch, or read the full transcript below.
by Tom O’Saben, EA
Hello again everybody, Tom O’Saben coming to you from the mothership here at the University of Illinois Tax School on the campus at Urbana-Champaign. It is Monday, March 16. Beware the Ides of March, where the Ides of March are typically referred to as March 15. Since March 15 fell on a weekend this year, the Ides of March for us as tax professionals is now Monday, March 16. What do we need to do today? Well, if we’ve got partnerships or S corp returns that aren’t yet filed, we at least have to get those extensions filed today. I’m going to show you now the Form 7004. That’s gonna pop up for you on the next slide here. And we need to get those electronically submitted today. Or if for some reason you can’t electronically file the return, they at least need to be postmarked today. And why do we care about that? You think, well, an S corporation or a partnership on the federal level typically doesn’t have any tax liability, so therefore shouldn’t have any penalties. Well, my friends the problem is the failure to file penalty (we’re gonna show you a slide on that here). The failure to file penalty for a partnership or an S corp has actually been raised to $205 per month, per shareholder or partner. And that can be assessed per shareholder or partner all the way up to 12 months. So that’s more than $2400 per shareholder or partner. We’re talking about a big deal here. So at the very least, like I said, if those returns aren’t ready to go today, let’s get those extensions filed, either again, electronically, or in paper form, so that our client can avoid the penalty. Now, another caution I would give you is to check what state you’re in. In the state of Illinois, for example, we tax the net profit of S corporations and partnerships. So if there is liability due, your client really should try to get some money sent in with the extension as well to the state of Illinois today, so there’s not interest in penalties assessed on top of the tax. That would be worthwhile pursuing as well. I’ll tell you, though, let’s say as my experience has always been over the years, I’m going to find about a month from now that I missed one or two of these extensions. It happens every year, I’ve never been able to cure that problem. There are in fact, revenue procedures to get clients out of failure to file penalties. And I will tell you, in the partnership world, when I show you this site here, in the partnership world, if the rules I’m going to show you on the quote actually apply, then the penalty shall not apply. But this is in the partnership arena. What I have done in the past is I’ve used the same framework of what I’m showing you here on the slide and I’ve separated out shareholder for partner and S corporation for partnership and used those circumstances to try to appeal a penalty assessed for late filing of an S corp return. And let me tell you, the IRS has said, okay, we’ll accept that once. But it is not the same revenue procedure that says for partnerships, if the circumstances are met, then the penalty shall not apply. So I want you to get that clear. So here we are, as the soothsayer said to Julius Caesar, beware the Ides of March. I come not to praise Caesar, but to bury him (quote from Marc Antony from Julius Caesar by William Shakespeare). So let’s get those extensions file today. Guys and girls, you can do this. We’ve got one month left. Don’t forget to take a breath for yourself. This is Tom O’Saben saying goodbye for just a while and I’ll keep in touch in getting you all the way to the finish line. Beware the Ides of March.
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