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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I had registered a new company in DE and i had zero revenue

Customer Question

Hi, i had registered a new company in DE and i had zero revenue last year. I did not file zero tax return on time and filed it later in april. I have got a 10k penalty notice from irs. Can somebody help me prepare a reply to IRS
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Can you verify "a new company" - what exactly did you register?Is that an LLC? Single member?Is that a corporation? C-corporation S-corporation? Other?
Customer: replied 1 year ago.
it is a C- Corp. registerd in Aug'14 at DE. No Revnue till dec 2014 so i didnt file. I was advised by my CPA to file in April 15 which i understand was after filing date but having zero revenues i didnt file and they have sent me a 10k fine.
Can you provide an explanation which i can give to IRS for this.
Expert:  Lev replied 1 year ago.
There is no explanation needed. You will need just to file the tax return - and there will be expected late filing penalty.I am surprised why you got a letter from the IRS... Was any income reported to that C-corporation?
Customer: replied 1 year ago.
As i had mentioned we have already files a tax return and there was no income reported. i have got a letter from IRS as penalty of late filing of 10k.
Expert:  Lev replied 1 year ago.
See page 3http://www.irs.gov/pub/irs-pdf/i1120.pdfLate filing of return. A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $135. The penalty will not be imposed if the corporation can show that the failure to file on time was due to reasonable cause.So far - I do not see how "no income reported" may trigger $10k in penalties. Can you verify how that large penalty is explained?
Customer: replied 1 year ago.
It just says failure to timely provide information required as per form 5472( which is for foreign held us corporations). I need your help in providing what should be my explanation for this as simple not being aware of filing date may not be a good idea.
Expert:  Lev replied 1 year ago.
Then you woudl need to amend your tax return and add that form. You would only need it if you are a nonresident alien - is that correct?
Customer: replied 1 year ago.
I dont think you understood my question. I have "Already" filed it but after the due date. It was ZERO reporting so i didnt find it necessary to file and i got a penalty of 10k. and hence my query was to get a proper response to send to IRS.
Expert:  Lev replied 1 year ago.
I am sorry - I can answer your tax related questions.But I may not provide you with actual letter which you will be sending to the IRS - and that letter must be signed by the preparer.I may verify the letter which you prepared.
Customer: replied 1 year ago.
Hi,somehow i am unable to rate you. I am not sure but the rating system is showing as disabled. I shall try again in some time. thanks for your prompt revert.
Expert:  Lev replied 1 year ago.
we may use a so-called the first-time abatement (FTA) penalty waiver - assuming you did not have penalties of a “significant” amount assessed in the past.
You will find more details in this publication - http://www.irs.gov/irm/part20/irm_20-001-001r-cont01.html
Criteria for Relief From Penalties
You might also find this publication - http://www.irs.gov/pub/foia/ig/tas/tas-13-0212-007.pdf
So you may simply write a letter attaching it to the tax return - explain your situation that was a honest mistake and soon as you know about filing requirements - you do your best to comply. And you are asking for "the first-time abatement"
At the same time - you may ask to abate penalties from all tax returns as that was your honest mistake.
Instead of writing a letter - you may use form 843 - that would generally make no difference..
File a form 843 -
http://www.irs.gov/pub/irs-pdf/f843.pdf
to request the "accuracy related penalty" be abate based on reasonable cause. If you provide the reason like "I forgot" - I do not think it will be considered as reasonable - so be careful when prepare an abatement request.
There might be some reason which you woudl not able to foreseen - such as health issues, tax preparer mistake, casualty, etc.
Here are instructions -
http://www.irs.gov/pub/irs-pdf/i843.pdf
If the IRS accepts your reasons as reasonable - and agrees to abate penalties - at least part of the issue would be resolved.