“Mistakes can often be as good a teacher as success.”
As a business owner, you might have already heard this one. Jack Welch, the founder of General Electric, made this statement and although he wasn’t talking about taxes, it applies.
The filing deadline for LLCs is always April 15th. The filing deadline for S-Corps and C-Corps is always March 15th. Sure, missing the filing deadline for your business tax return is a mistake. However, it can be resolved, and with less of a penalty than you may think. You’re constantly learning as a business owner and probably making your fair share of mistakes along the way. Let’s take a look at how you can prevent one of them.
Calculating the Late Filing Penalty
Penalty fees for filing late LLC and S-Corp tax returns are based on how many months you are late to filing and the amount of shareholders or managing members involved. Late filing fees for a C-Corp are based on how many months the return is late. Let’s break it down a bit further.
- LLC Late Filing Penalty: You will be penalized $195 per month (for a maximum of 12 months) multiplied by the amount of managing members. So, if you have 3 managing members (aka partners) and you file your business tax return in September, you will multiply $195 by 5 months (past the deadline). Multiply that number by three managing members and you will get your total penalty fee of $2,925.
- S-Corp Late Filing Penalty: You will be penalized $195 per month (up to 12 months) multiplied by the amount of corporate shareholders you have. Therefore, if you have 2 shareholders and you file your business tax return in July, you will multiply $195 by 4 months (past the deadline). Then, multiply that number by 2 shareholders and you have calculated the total penalty fee to be $1,560.
- C-Corp Late Filing Penalty: This one works a bit differently from the other two entities. The penalty fee is 5% of the unpaid tax amount for each month the taxes remain unpaid. That being said, if the corporation’s tax liability is $4,000 and you are filing the return 3 months late, then you would multiply $4,000 by 5%. Multiply that number by 3 months late and you’ll get your penalty total of $600.
Calculating the Additional Late Filing Penalty
If you own a corporation and owe taxes to the IRS, then an additional ½ of 1 percent, or .005, penalty is imposed on the unpaid tax amount for each month the return remains un-filed.
For example, if your late filing penalty is $900 and your corporation’s income tax
is $5,000, multiply $5,000 by .005 to get the $25 penalty amount. Add the $25
to the $900 late filing penalty for a total penalty of $925.
How to prepare your late business tax return online with PriorTax.
Penalty fees add up quickly, and there’s only one way to get them to stop accruing: file your business tax return. You can prepare your business tax return with PriorTax for as little as $49.95. That’s a decent price tag compared to private accountants who can run you into the low thousands with all the bells and whistles. With PriorTax, you’ll even be able to consult with one of our CPAs. Just follow these simple steps:
- Create an account. You’ll choose your tax year along with a unique username and password.
- Begin entering your business tax information. This is everything from your mailing address to revenue to expenses.
- Choose a time to speak with one of our CPAs. One of our accountants will be able to review your account and give you a call to discuss anything you may have overlooked.
- Submit your account.