Most entrepreneurs who form an LLC or incorporate a business are not aware of their tax and government filing requirements. Entrepreneurs often think there are no filing requirements because they are in the startup phase and there is very little or no financial activity. Unfortunately, this often costs the startup thousands of dollars in penalties and can really mess up a future angel financing or venture capital financing.
To be perfectly clear: if you formed an LLC or incorporated a business in 2015 or earlier, you have tax and other government filings that are due in early 2016 – even if you had no or very little financial activity.
Here are the most common IRS, MA (other states have similar deadlines) and DE filings and some of the consequences for late filing:
LLC Income Tax (Single Member): This one is somewhat easy – just need to include Schedule C (Profit and Loss from Business) with your personal federal and state income tax return. Due April 15th. IRS late filing consequences are penalty and interest based on your total tax liability (from all sources).
LLC Income Tax (Multi-Member): Need to file a partnership return (Federal Form 1065 and MA Form 3) and distribute K-1 forms to the members. These forms are not intuitive. Due April 15th. IRS late filing consequence is $195 per month per member penalty. This penalty is very difficult to abate, but worth a try if you can prove “reasonable cause”.
S Corporation Income Tax: Need to file a corporate tax return (Federal Form 1120S and MA Form 355S) and distribute K-1 forms to the shareholders. These forms are not intuitive. Due March 15th. IRS late filing consequence is $195 per month per shareholder penalty. This penalty is very difficult to abate, but worth a try if you can prove “reasonable cause”.
C Corporation Income Tax: Need to file a corporate tax return (Federal Form 1120 and MA Form 355). These forms are not intuitive. Due March 15th. IRS late filing consequences are penalty and interest based on your total tax liability.
Form 1099-MISC: All businesses need to distribute Form 1099-MISC to any independent contractors or attorneys that were paid $600 or more in 2012. Due to the recipient on January 31st and to the IRS and MA on February 28th. IRS penalty for noncompliance is $100 per form or $250 per form for “intentional disregard.”
MA Secretary of State Annual Report: Most LLCs or corporations physically located in MA have registered with the MA Secretary of State, even if they are formed or incorporated in another state, such as Delaware. An annual report is due:
DE Secretary of State Annual Report: Many businesses incorporate or form their LLC in DE. An annual report is due:
This only covers the very basics and often there are more serious consequences for late filing and/or noncompliance. There are many “moving parts” to tax compliance and a quick call to your accountant can save you a ton of money and headaches.
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
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