Illinois firms face penalties for not filing oversights

Corporations in Illinois and other states may find that failing to file federal tax returns or submitting them after the deadline results in the assessment of penalties by the IRS. Subchapter C corporations, which are separate from their shareholders for tax purposes, have to file their annual returns using a Form 1120. This form must be filed by March 15, a month earlier than the standard April deadline for most individual taxpayers, and companies that miss it are made to pay penalties amounting to 5 percent of overdue income tax per month.

Variances in the way the law is applied impact different firms in unique ways. Corporations that rely on fiscal years instead of accounting based on the standard calendar year often have different deadlines, but those that can't file in time may still find it advantageous to submit a Form 7004. This form lets companies request filing extensions of six months, but it doesn't extend the deadlines for paying owed taxes.

Companies that accrue late fees for nonpayment of federal taxes are ostensibly only assessed penalties of up to 25 percent. Nonetheless, the IRS may also assess separate penalties for late payments while increasing owed taxes by 0.5 percent each month. Although collectors have been known to reduce late filing penalties to offset their overdue payment counterparts, firms can still pay as much as 47.5 percent in total penalties.

Illinois firms that want to retain their profitability may face major setbacks if they fail to account for their tax obligations properly. IRS charges can mount rapidly, and such penalties could severely compromise a firm's ability to conduct its business as usual. C corporations and other entities often consult with tax law attorneys to learn how to file correctly and minimize the losses associated with any penalties they may otherwise be assessed.

Source: Houston Chronicle, "Penalty for Failure to File Corporate Tax Return", Michael Marz, December 14, 2014

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