Page 135 - BusinessStructures & Forms

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The amount of estimated tax required to be paid annually is information required to be shown (or the inclusion of incorrect
the smaller of (a) the total of the above taxes shown on the information), a $290 penalty may be imposed with respect to
return for the tax year (or if no return is filed, the total of these each Schedule K-1 (and Schedule K-3, if applicable) for which a
taxes for the year), or (b) the sum of (i) the investment credit failure occurs. If the requirement to report correct information is
recapture tax and the built-in gains tax shown on the return for intentionally disregarded, each $290 penalty is increased to
the tax year (or if no return is filed, the total of these taxes for the $580 or, if greater, 10% of the aggregate amount of items
tax year), and (ii) any excess net passive income tax shown on required to be reported. See sections 6722 and 6724 for more
the corporation's return for the preceding tax year. If the information.
preceding tax year was less than 12 months, the estimated tax The penalty won't be imposed if the corporation can show
must be determined under (a). that not furnishing information timely was due to reasonable
The estimated tax is generally payable in four equal cause. See Caution, earlier.
installments. However, the corporation may be able to lower the Trust fund recovery penalty. This penalty may apply if certain
amount of one or more installments by using the annualized excise, income, social security, and Medicare taxes that must be
income installment method or adjusted seasonal installment collected or withheld aren't collected or withheld, or these taxes
method under section 6655(e). aren't paid. These taxes are generally reported on:
For a calendar year corporation, the payments are due for • Form 720, Quarterly Federal Excise Tax Return;
2023 by April 18, June 15, September 15, and December 15. • Form 941, Employer's QUARTERLY Federal Tax Return;
For a fiscal year corporation, they are due by the 15th day of the • Form 943, Employer's Annual Federal Tax Return for
4th, 6th, 9th, and 12th months of the year. If any date falls on a Agricultural Employees;
Saturday, Sunday, or legal holiday, the installment is due on the • Form 944, Employer's ANNUAL Federal Tax Return; or
next day that isn't a Saturday, Sunday, or legal holiday. • Form 945, Annual Return of Withheld Federal Income Tax.
The corporation must make the payments using electronic The trust fund recovery penalty may be imposed on all
funds transfers as described earlier. persons who are determined by the IRS to have been
responsible for collecting, accounting for, or paying over these
For information on penalties that may apply if the corporation taxes, and who acted willfully in not doing so. The penalty is
fails to make required payments, see the Instructions for Form equal to the full amount of the unpaid trust fund tax. See the
2220. Instructions for Form 720, Pub. 15 (Circular E), Employer's Tax
Interest and Penalties Guide, or Pub. 51 (Circular A), Agricultural Employer's Tax
Guide, for details, including the definition of “responsible
If the corporation receives a notice about penalties after persons.”
! it files its return, send the IRS an explanation and we will Other penalties. Other penalties can be imposed for
CAUTION determine if the corporation meets reasonable-cause negligence, substantial understatement of tax, reportable
criteria. Don't attach an explanation when the corporation's transaction understatements, and fraud. See sections 6662,
return is filed. 6662A, and 6663.
Interest. Interest is charged on taxes paid late even if an Accounting Methods
extension of time to file is granted. Interest is also charged on Figure income using the method of accounting regularly used in
penalties imposed for failure to file, negligence, fraud, keeping the corporation's books and records. The method used
substantial valuation misstatements, substantial must clearly reflect income. Permissible methods include cash,
understatements of tax, and reportable transaction accrual, or any other method authorized by the Internal Revenue
understatements from the due date (including extensions) to the Code.
date of payment. The interest charge is figured at a rate
determined under section 6621. The following rules apply.
• Generally, an S corporation can't use the cash method of
Late filing of return. A penalty may be assessed if the return is accounting if it’s a tax shelter (as defined in section 448(d)(3)).
filed after the due date (including extensions) or the return See section 448 for details.
doesn't show all the information required, unless each failure is • A corporation must use an accrual method for sales and
due to reasonable cause. See Caution, earlier. For returns on purchases of inventory items unless it is a small business
which no tax is due, the penalty is $220 for each month or part of taxpayer (defined later). See the Form 1125-A instructions. If you
a month (up to 12 months) the return is late or doesn't include are a small business taxpayer, you can adopt or change your
the required information, multiplied by the total number of accounting method to account for inventories (i) in the same
persons who were shareholders in the corporation during any manner as materials and supplies that are non-incidental, or (ii)
part of the corporation's tax year for which the return is due. If tax to conform to the taxpayer’s treatment of inventories in an
is due, the penalty is the amount stated above plus 5% of the applicable financial statement (as defined in section 451(b)(3))
unpaid tax for each month or part of a month the return is late, up or, if the taxpayer doesn’t have an applicable financial
to a maximum of 25% of the unpaid tax. The minimum penalty statement, the method of accounting used in the taxpayer’s
for a return that is more than 60 days late is the smaller of the tax books and records prepared in accordance with the taxpayer’s
due or $450. accounting procedures. Generally, IRS consent is required for
Late payment of tax. A corporation that doesn't pay the tax changes in accounting methods. See Rev. Proc. 2018-40 for the
when due may generally be penalized /2 of 1% of the unpaid tax procedures by which a small business taxpayer may obtain
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for each month or part of a month the tax isn't paid, up to a automatic consent to change its method of accounting to reflect
maximum of 25% of the unpaid tax. The penalty won't be the statutory changes made in this area. Also, see Change in
imposed if the corporation can show that the failure to pay on accounting method, later.
time was due to reasonable cause. See Caution, earlier. • Special rules apply to long-term contracts. See section 460.
• Generally, dealers in securities must use the mark-to-market
Failure to furnish information timely. For each failure to accounting method. Dealers in commodities and traders in
furnish Schedule K-1 (and Schedule K-3, if applicable) to a securities and commodities can elect to use the mark-to-market
shareholder when due and each failure to include on accounting method. See section 475.
Schedule K-1 (and Schedule K-3, if applicable) all the

Instructions for Form 1120-S (2022) -5-