1120 Penalty
I guess even us old timers found out about that law the hard way. Its been around as long as I can remember and I remember it very well. What a suprise it was........
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1120 Estimated Penalty
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Is the penalty based on the amount of tax owed?
I ask because I have a corporation that I haven't had make estimates, they don't expect to have much profit after wages.
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Eeeeek
It doesn't make sense. But here's what's in the code book.
IRC section 6655(d)(1): "...Clause (ii) [exception for payment equal to prior year tax for corporations] shall not apply if the preceding taxable year was not a taxable year of 12 months, or the corporation did not file a return for such preceding taxable year showing a liability for tax..."
Proposed Reg. section 1.6655-2(a)(1) [exceptions to tax]: "...The amount of tax shown on the return for the preceding taxable year, provided that the preceding taxable year was a year of 12 months and a return showing a liability for tax was filed for such year..."
Yipes, man. That's rough. I wasn't aware of that strange provision.
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1120 Estimated Penalty
Just incurred my first penalty for a Corporate failing to make estimated payments.
This one is a real winner. During the previous year, the corporation had a loss year,
with a tax of zero.
Apparently, you cannot bail out of the penalty if your previous liability was zero. If your tax was as much as one dollar, you essentially can base your estimated tax on the previous year liability.
This sounds asinine, but you can read that in the 1120 instructions. Does this have its basis in the code (surely not) or in regulations (probably). Are the regulations in keeping with the code in this case?
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