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Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 3572
Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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My small company ceased operations in 2011. We filed taxes

Customer Question

My small company ceased operations in 2011. We filed taxes at the end of 2011. There have been no business transactions since that time. There remains a balance sheet for the company. We have not considered any tax implications associated with the business for 2012, 2013 and 2014. How do I file taxes for these missing years?
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Welcome. Thank you for choosing us to assist you. My name is ***** ***** my goal is to help make your life, a little... less taxing.
What is your business set up as? A C-corp, an S-corp, partnership, or LLC? If your business is a corporation, until you officially dissolve it, you are required to file a tax return, even id there have been no transactions. Some states require than an annual franchise tax be paid. In addition, if you are an S-corp, there is a steep penalty for not filing a return. I know that you stated that there have been no transactions, therefore, income tax would be due, but I am providing you with general information. SEE BELOW:
Filing Without Tax Due
If you file your S corporation income tax return late and no tax is due, the late filing penalty is $195 per month or for any portion of a month the return is late multiplied by the number of corporate shareholders. For example, if you have three corporate shareholders and the tax return is filed one month late, calculate the penalty by multiplying the $195 monthly penalty by the one month the return is filed late multiplied by your three shareholders. The total penalty is $585.
Filing With Tax Due
If you file your income tax return late and the S corporation owes taxes, the IRS imposes an additional 5 percent penalty on the unpaid tax for each month or portion of a month the return remains unfiled. For example, if your S corporation’s tax is $5,000, compute the penalty by multiplying the $5,000 by 5 percent to get $250. Now add the $250 penalty to the $585 late filing penalty for a total of $835. The maximum IRS-imposed penalty is 25 percent of the unpaid tax amount. The penalty and unpaid tax are added together to help determine how much you owe the IRS.
Failing to File
When you fail to file a Form 1120 by the deadline, the corporation is charged a monthly penalty that's equal to 5 percent of any income tax that remains unpaid. Moreover, the corporation will reach the maximum 25 percent penalty after the fifth month that the return remains unfiled. Even if the corporation wouldn't have reported any taxable income had the return been filed, the IRS will still charge a penalty of $100 once the return is more than 60 days late.
Let me know if you require further assistance with this matter.
Customer: replied 2 years ago.
The company is an LLC out of California with my wife and I the only members. We have paid the annual franchise tax fees ( so I suppose there was a single transaction for the year).
Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,
By default, a multi-member LLC is considered a partnership for tax purposes unless the Form 8832 was completed and you elected to be taxed as a corporation. There is a penalty for not filing the partnership return as well, even though no taxes were owed for the years. SEE BELOW:
(a) General rule
In addition to the penalty imposed by section 7203 (relating to willful failure to file return, supply information, or pay tax), if any partnership required to file a return under section 6031 for any taxable year—
(1)fails to file such return at the time prescribed therefor (determined with regard to any extension of time for filing), or
(2)files a return which fails to show the information required under section 6031, such partnership shall be liable for a penalty determined under subsection (b) for each month (or fraction thereof) during which such failure continues (but not to exceed 12 months), unless it is shown that such failure is due to reasonable cause.
(b) Amount per month
For purposes of subsection (a), the amount determined under this subsection for any month is the product of—
(1)$195, multiplied by
(2)the number of persons who were partners in the partnership during any part of the taxable year [1]
(c) Assessment of penalty
The penalty imposed by subsection (a) shall be assessed against the partnership.
If the partnership has not been officially dissolved, you must file the tax returns for those years. The IRS will send you a bill as to how much you owe in failure to file fees.
You may be able to request an abatement of some of the penalties, but I doubt it if the IRS will abate all 3 years of penalties.