Does Form 966 have to be filed?

[Tax Sleuth]

I have read in different articles on the internet that IRS Form 966 technically should be filed if you are closing an S Corporation. However, I have also read that there is no penalty if you don't file the Form 966. Is checking the Final return box on the Form 1120S sufficient, or will the IRS ask for a completed Form 966 too? Is it correct that there is no penalty for not filing the Form 966? The situation that I'm dealing with relates to an LLC that is being taxed as an S Corporation.

[Roland Slugg]

Code §6043 says that "every corporation shall within 30 days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of its capital stock, make a return setting forth the terms of such resolution or plan and such other information as the Secretary shall by forms or regulations prescribe." Regs §1.6043-1 then explicitly say that F-966 must be filed within 30 days after the adoption of a plan to liquidate a corporation. (Emphasis added)

Since your entity is actually not a corporation, but an LLC, it isn't crystal clear, but I would say that since the LLC has elected to be taxed as a corporation, then the filing of F-966 is part of that overall tax treatment. Thus, I would advise the client to file the form. It is not a difficult form to complete.