Tax News
Should I File my Business Entity Return Even Though I Do Not Have the Money to Pay?

If you owe, but cannot pay your taxes by the due date, you still must file your return on time and pay as much as you can. Although there are penalties for late payment of tax, the penalty for late filing of the return is usually higher1.

This statement is especially true for pass-through business entities, such as partnerships, LLCs2, and S corporations.

Similar to the federal law (IRC sections 6698 and 6699), California law (R&TC Section 19172 and 19172.5) imposes  a partnership late filing penalty for the late filing of pass-through business entities returns (Forms 565, 568 and 100S) or if you file the returns without required information. These penalties are imposed even if all taxes have been paid or (as is the case with a general partnership) no taxes are imposed.

California Penalty

Penalty Imposed for Failure to File Partnership, LLC, or S Corporation Returns

For returns required to be filed on or after January 1, 2011, the partnership late filing penalty/S-corporation late filing penalty will be increased to $18 for each month or part of a month (for a maximum of 12 months) multiplied by the total number of partners, members, or shareholders in the entity during any part of the taxable year for which the return is filed after its due date. This penalty is in addition to the existing late filing penalty.

Although federal and California law both impose late filing penalties on pass-through business entities returns, as we outline in the following chart, there can be a significant difference when these penalties start to accrue and how much will be imposed.

Partnership Federal California

Form

1065

565

Due Date
(Calendar Year Filer)

April 15th
(15th day of 4th month)

April 15th
(15th day of 4th month)

Application to Extend

Application Required

Automatic
(if the return is filed within 6 months of original due date)

Extension Due Date

Sept 15th
(5-month extension)

Oct 15th
(6-month extension)

Penalty Per Partner

$195 per month
(or fraction thereof)

$18 per month
(or fraction thereof)

 

Limited Liability Company Federal California

Form

1065

568

Due Date (Calendar)

April 15th
(15th day of 4th month)

April 15th
(15th day of 4th month)

Application to Extend

Application Required

Automatic
(if the return is filed within 6 months of original due date)

Extension Due Date

Sept 15th
(5-month extension)

Oct 15th
(6-month extension)

Penalty per partner

$195 per month
(or fraction thereof)

$18 per month
(or fraction thereof)

 

S Corporation Federal California

Form

1120S

100S

Due Date (Calendar)

March 15th
(15th day of 3rd month)

March 15th
(15th day of 3rd month)

Application to Extend

Application Required

Automatic
(if the filed within 7 months of the original due date)

Extension Due Date

Sept 15th
(6-month extension)

Oct 15th
(7-month extension)

Penalty Per Partner

$195 per month
(or fraction thereof)

$18 per month
(or fraction thereof)

 

After the return is processed, we will send a bill, including penalties and interest.

If the business entity is unable to pay the balance in full by the due date on your notice, the business entity can enter into an installment agreement if it cannot pay the total balance in 90 days due to a financial hardship. Under this program, it would agree to pay a specified amount on a specified day each month.

Requirements for an Installment Agreement:

  • You must file any delinquent tax returns.
  • You may need to complete and mail to us a financial condition form. If necessary, we may require other financial documentation to process your installment agreement request.
  • You must pay a $50 fee to set up an installment agreement. We will add the fee to your business entity's balance due.

Our staff will determine if an account qualifies for an installment agreement and the time period allowed.

For more information about these notices is available, go to ftb.ca.gov and search for installment agreements - business.

Back to August 2012 Tax News