S Corp Late Filing Penalty Abatement

[erchess]

I have read on this board that an S Corp can get an abatement of the penalty for late filing the first time this occurs. Can anyone confirm this and give me a code cite as well as any other pointers in asking for it? Many Thanks.

[oceanlovin'ea]

Yes

It is true. I have had 2 clients that got the penalties waived. You only need to call the number on the letter they received and talk to someone and they have processed the waiver while I was on the phone. Client got a letter a few weeks later as verification.

Linda

[erchess]

Three Letters

There are three letters because he has three corps. The three CP162 notices have the same date. Does that change anything? The corps were created on the same date and were not filed because in the taxpayer's mind they didn't do anything. It actually turns out one did but anyway we have all the returns filed.

Thank you for all answers.

[oceanlovin'ea]

3 different corps

If they are 3 different corps, then I would think each one would qualify for the waiver. Just call IRS and hopefully you will get a very nice person who will make those penalties disappear quickly.

Linda

[S T]

Agree

Each corp should stand on its own - and separate notices under ID# and separate waivers.

Sandy

[JohnH]

Well, at least the task is simple.
Just write one letter that will make them cry and make 2 copies, changing the letterhead info while leaving the body the same. Probably should send them in separate envelopes, though...

[erchess]

As I Expected

I am hearing advice to call and advice to write. Would either of you care to elaborate on the reasons for your advice and would anyone else care to offer opinions?

[S T]

Prior Experience

I believe it has to do with "whom" you are speaking with on the telephone at IRS - I have had great luck and then I have had absolutely NO LUCK and have to send something in writing.

I would try the phone call first - you will need POA on file - and there is a number for Corps or Small business entities as I recall - I would have to look up what I have in a file - or try the Tax Practitioner's Hotline.

Sandy

[JON]

Old rules

the penalties were under partnership rules so if all the shareholders, has to be 10 or fewer, included the S information on a timely filed return,for them, that was an exception. The new rules in effect now say Partnerships and S corps are due Sept 15. I think in this first year you will have less success in getting out of it-10 or fewer will still work-I think?

[erchess]

Jon

This is not a case of corps not making their S Elections on time. This guy formed his corps and made timely S Elections which got acknowledged but then he saw no reason to do returns because there was essentially no activity. Of course we professionals know that no activity returns still have to be filed and returns showing $20 of loss or $5 of gain have to be filed. I did them but now the IRS is trying to collect Late Filing (of tax return) Penalties.

[JohnH]

There's no rule, guideline, or code section for getting a penalty abatement in this situation. The penalty only came into effect last year. All you can do is ask and hope for the best. If they say "No", just ask again - maybe make a couple of runs at them.

If the corp still hasn't activated, then a full year of penalties might make it more advantageous to just dissolve the corp and form a new one, because the penalty is assessed at the corp level only and can't be assessed against the shareholder(s). It's all a matter of running the numbers.

[Nashville]

Kidney Machine

I'm with John on this sad story strategy.

Tell them your 6 yr old daughter has to have a kidney dialysis machine. She was walking the return to the mailbox and passed out. The ambulance people used the paper for a temporary fluid funnel.

Bring a tear to a glass eye.

[JohnH]

Yes, and save the letter. Even if it doesn't succeed in getting an abatement, you might have the beginnings of a pretty good country music song....maybe the royalties will be enough to pay the penalty.