In the US, S-Corporations and S-Corps are a common corporate structure for startups and small companies. S-Corps are exempt from federal income tax since they are pass-through entities; instead, the shareholders report their portion of the company’s income on their personal tax returns. S-Corps must, however, submit a yearly tax return to the IRS, and failing to do so on time may result in fines and other repercussions. This page will cover other pertinent issues, such as the fine for filing S-Corp late.
Late S-Corp Filing Penalty
Every year by March 15th, S-Corps must submit Form 1120S, the U.S. Income Tax Return for an S-Corporation. The business could face fines and interest if it doesn’t submit the return on time. For each month or portion of a month that the return is late, up to a maximum of 12 months, there is a $195 fine for filing an S-Corp return after the deadline. The fine would be $780 ($195 multiplied by 4) if the S-Corp filed its return four months late, for instance.
How Do I Convert My S Corp to an LLC, then?
There are a few procedures you must follow if you want to convert your S-Corp to an LLC. You must first determine whether converting S-Corps to LLCs is legal in your state. If so, you must submit the required paperwork to the state and IRS. In order to reflect the new business structure, you must also change all of your business permits, licenses, and contracts. You also need to alter your tax status with the IRS and notify your creditors and shareholders of the change. How Do I Dissolve My S-Corp? You must submit Form 966, Corporate Dissolution or Liquidation, to the IRS if you elect to dissolve your S-Corp. The assets of the corporation must also be sold, with the proceeds going to the shareholders. In addition, you must pay any unpaid taxes and liabilities and file the S-Corp’s final tax return. Penalties and interest may apply if this is not done.
Is a Late Filing Fee for Form 966 Applicable?
Yes, there is a fine for filing Form 966 beyond the deadline. For every month or portion of a month that the form is late, up to a maximum of 12 months, there is a $195 fine. For instance, the fine would be $585 ($195 multiplied by three) if you filed Form 966 three months late. Do I Still Owe Corporation Tax If I Dissolve My Company? If your S-Corp is closed, you can still owe corporation tax on your final tax return. The company’s earnings and outlays up to the date of dissolution will be detailed in the tax return. There can be a tax obligation that needs to be paid, depending on the financial status of the organization. However, there won’t be any corporation tax to pay if the business had no revenue or outlays in the last tax year.
Finally, S-Corps must submit their tax filings on schedule to avoid fines and other repercussions. You must complete the steps and submit the relevant paperwork to the state and IRS if you wish to convert your S-Corp into an LLC or close it. In order to avoid penalties and interest, you must also pay any unpaid taxes and debts. It’s essential to seek advice from a tax expert or an attorney if you have any queries or concerns.
A number of circumstances, including exceeding the cap of 100 shareholders, having a non-qualified shareholder, or making unlawful allocations of income and loss, might result in the termination of a S election. However, a S election would not be terminated if the C corporate status was maintained.