Tax Tip #209

A taxpayer owns 100 percent of an S Corporation, 50 percent of a partnership with the spouse owning the other 50 percent. They have not filed the S Corporation, partnership or their personal tax returns in a timely manner. They are aware that they do not owe tax on their personal tax return, and S Corporations and partnerships do not pay tax on the federal level (with very few exceptions).

When the taxpayer files these 3 tax returns where no money is due, what penalty does the IRS charge when the tax returns are finally filed?

A. No tax due, no penalties for any of the 3

B. Penalty for the S Corporation and the partnership only

C. Penalties for all 3

D. Penalty only for the individual tax return

When an S Corporation or partnership is filed late, the penalty is $235 for each month late multiplied by the number of shareholders or partners of the business, for up to 12 months. There is no penalty when an individual tax return is filed late if there is no tax due.

If you answered B, congratulations — you got an A on this tax quiz.