Corporation owners are sometimes under the wrong impression that if they didn't make any money or if they don't owe any taxes, they don't need to file a tax return. However, depending on the type of corporation, the penalties for not filing a tax return can be severe even if the corporation doesn't owe any taxes.
A corporation must file its federal income tax return by the 15th day of the third month after its tax year ended. If a corporation's tax year ends at the same time as a calendar year, on Dec. 31, its taxes are due by March 15. After a corporation dissolves, its final tax report must be filed by the 15th day of the third month after it dissolved. Corporations can request a six-month filing extension from the Internal Revenue Service.
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A C corporation is a general corporation -- any corporation that hasn't elected for special tax status. If this corporation files its tax return late, the penalty is not severe. It may be fined 5 percent of its unpaid tax for each month that it's late, with a maximum 25 percent fine. When the return is more than six months late, the minimum penalty is $135 or the tax due, whichever is smaller. In other words, if a C corporation does not owe any taxes, it will not end up having to pay a fine for filing late.
A subchapter S corporation is a corporation that elects for a special S tax status under the IRS. These corporations have to pay severe fines if they file late tax returns. When no tax is due, the S corporation is charged $195 for each month it is late, multiplied by the number of people who were shareholders in the corporation at any time in the last year. So, if an S corporation has 30 shareholders at the end of the year, but had five more earlier who later sold their stock, the S corporation will have to pay 35 x 195 for each month the tax return is late, or $6,825 a month.
A limited liability company is a hybrid structure of a partnership and a corporation. An LLC must elect for corporation status on its tax return or, by default, it is taxed as a partnership. If it elected for corporate status, it will be taxed as a C corporation and won't owe any fines for late filing. However, if it elects to be taxed as a partnership or if it makes no election at all, it will receive a stiff fine for a late tax return even if it doesn't owe any taxes. In that situation, the LLC will be fined $195 a month for every month the return is late, multiplied by the total number of people who were partners in the LLC at any point in time during the tax year.
In addition to a yearly tax return, corporations must file estimated taxes if they expected to owe $500 or more in taxes that year. Corporations that do not expect to owe any taxes do not have to pay these quarterly estimates.
Some states require corporations to pay state franchise taxes and will charge fees if the corporation files the franchise form late, even if it owes no taxes. Arizona, however, does not have a state franchise tax for corporations. It does tax corporate income at 6.968 percent as of 2017. These tax returns are due by April 15. If filed late, the penalty is 4.5 percent of the amount in tax owed. Thus, if a corporation doesn't owe taxes in Arizona, there is no fine for filing the return late.