How the late filing works for small businesses
Today is March 15, the due date for U.S. corporation tax returns, including one shareholder S corporations and C corporations.
I am checking in with my small business contacts to make sure that they have filed the tax return or requested an extension to the filing date. I can help file the extension to avoid a tax penalty even if I am not contracted to file the tax return. If you miss the filing deadline today and do not request an extension the tax penalty can be substantial, depending on the number of shareholders and the length of the delay.
The late filing penalty starts tomorrow. The penalty is $195 for each shareholder or partner times the number of months of the delay. An additional fine is due is a tax payment is late.
For example, consider this common small business situation where an S corporation is owned by a husband and wife. Assume they miss the March 15 deadline and file a business tax return on April 15 when they file their personal income tax return. S corporations do not pay taxes directly, so there is no underpayment of tax. The late filing penalty is 2 x 195 = $390. The $390 could have been easily avoided by electronically filing for an extension today.