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View Full Version : Learned a costly lesson from IRS


HBMTN
10-04-2011, 11:02 PM
We completed our 1st full year in business this past spring and as April 15th was coming around I called my accountant to have hime file an extension for us with the IRS. This was our 1st time filing as a Chapter S Corp. He then notified me that a Corporation must file taxes by March 15th not April 15th, he said he would file a personal extension and for us to get all of our tax info to him. We thought we were ok with the personal extension filed and took another two three months getting our accountant all of the info and he then filed it for us and all is good right?

Well we got our tax money back two months ago and we now know we have to file an extension next year by March 15th. As a bend over and learn this lesson from the IRS today I get a letter stating they are fining me $175 per month per officer of the corporation and there is two ( my wife and I) for the 3 months after March until I filed and I owe them $1100 due two weeks from today. Really sucks when you are trying to get on your feet, I think being a new corporation I should have gotten a warning, I could see it if I had been in business for a few years but I did not know and thought I was ok with the personal extension filed.

landarc
10-04-2011, 11:34 PM
I would also ask your accountant why he didn't notify you when you didn't notify him. I have run businesses for over 20 years, and one of the accountants jobs is to help you handle the financial side of the business. He should have recognized that you did not contact him and asked what was happening.

PitRow
10-05-2011, 11:00 AM
Kinda the same deal here, though totally my fault.... I thought I sent in my LLCs papers, but in August I found them sitting on my desk still. 3 LLC members x 4 months late x $195/mo = $2340 in fines. For an LLC that made less than $100 in profit last year.

I really think it should be on a sliding scale based on your profit. Those huge corporations can easily afford to pay that fine, mine.... well we're talking about closing up shop now.

smokinit
10-05-2011, 11:00 AM
I would also ask your accountant why he didn't notify you when you didn't notify him. I have run businesses for over 20 years, and one of the accountants jobs is to help you handle the financial side of the business. He should have recognized that you did not contact him and asked what was happening.

Dam straight he should have notified you
thats his job!!!

Carbon
10-05-2011, 12:01 PM
Man, that sucks. I know, I went through the exact same thing when I became a LLC several years ago and simply assumed the partnership return was ok to file late and didn't file til several months later.

His accountant in the OP's case should have definitely notified him of the penalty upon filing the extension.

deepsouth
10-05-2011, 12:11 PM
time for a new accountant.

southernsmoker
10-05-2011, 12:18 PM
Good Grief thats out of this world! Not hard to see why the economy is in the toilet..

landarc
10-05-2011, 12:47 PM
While I feel for the OP and anyone who has to pay tax penalties, I have certainly paid a few along the way, this is not why the economy in the the dumper. If you form a corporation, even an LLC, you have an obligation to learn what the law gives and takes from you. Being a corporation is not just about the protections, there are costs as well.

The responsibility here is completely the business owners and the consultants, the government did not change the law, nor is the OP being singled out. It sucks, but, the rules were there. For anyone considering a LLC, the attorney also owes you an obligation to make it clear that you are no longer an individual, and the laws change due to that. There has been a general breakdown of expertise in this case.

danbrazelton
10-05-2011, 01:00 PM
Lesson here is two fold - when you go into business - hire a lawyer and an accountant from day 1. Second: have both of them help you create a calendar of corporate events - there are also requirements to register annually with the California Secretary of State for example.

deepsouth
10-05-2011, 01:08 PM
While I feel for the OP and anyone who has to pay tax penalties, I have certainly paid a few along the way, this is not why the economy in the the dumper. If you form a corporation, even an LLC, you have an obligation to learn what the law gives and takes from you. Being a corporation is not just about the protections, there are costs as well.

The responsibility here is completely the business owners and the consultants, the government did not change the law, nor is the OP being singled out. It sucks, but, the rules were there. For anyone considering a LLC, the attorney also owes you an obligation to make it clear that you are no longer an individual, and the laws change due to that. There has been a general breakdown of expertise in this case.

citizens united vs. the federal election commission. corporations are people too.

;o)

timzcardz
10-05-2011, 01:14 PM
I would also ask your accountant why he didn't notify you when you didn't notify him. I have run businesses for over 20 years, and one of the accountants jobs is to help you handle the financial side of the business. He should have recognized that you did not contact him and asked what was happening.

Dam straight he should have notified you
thats his job!!!

time for a new accountant.


These seem to assume that the accountant was actually aware that an S Corp had been established.

I find that my wife, a CPA, never fails to be amazed at the things clients never inform her of until it is too late!

deepsouth
10-05-2011, 01:15 PM
These seem to assume that the accountant was actually aware that an S Corp had been established.

I find that my wife, a CPA, never fails to be amazed at the things clients never inform her of until it is too late!


not speaking on the case of the OP, but i completely understand this and those are definitely different situations.

porkingINpublic
10-05-2011, 03:07 PM
Kinda the same deal here, though totally my fault.... I thought I sent in my LLCs papers, but in August I found them sitting on my desk still. 3 LLC members x 4 months late x $195/mo = $2340 in fines. For an LLC that made less than $100 in profit last year.

I really think it should be on a sliding scale based on your profit. Those huge corporations can easily afford to pay that fine, mine.... well we're talking about closing up shop now.

it amazes me how in a time when people are being laid off that they would stick it to you like this... not every buisness owner can afford a lawyer or even an accountant.

2Fat
10-05-2011, 03:19 PM
it amazes me how in a time when people are being laid off that they would stick it to you like this... not every buisness owner can afford a lawyer or even an accountant.
to me it seems it is the business owners obligation to know what is necessary required OR hire people that do--also SCORE is a great resource/--as is your banker


phatphingers like tapppytalk

HBMTN
10-05-2011, 07:05 PM
No I don't in any way blame my accountant, while he did know I had started a business he was not fully aware of anything. It was my fault, but how is one to know the date is different? I think they IRS should make you aware of it when you file to become a corporation.

chachahut
10-06-2011, 06:01 PM
Call the IRS directly - should be a number on the notice. Same thing happened to us our first year. We called the IRS & they waived the penalty with the understanding we only get one free pass. We were more than a bit surprised at how reasonable they were.

My advice - call your local IRS office & explain "new S Corp - !st time filing - was not aware of officer penalties - etc." Hopefully they'll be understanding.

marshallflyer
10-06-2011, 09:32 PM
it amazes me how in a time when people are being laid off that they would stick it to you like this... not every buisness owner can afford a lawyer or even an accountant.
I work in the income tax department of large corporation. When the economy goes south so does the revenue of the taxing jurisdictions. They become more agressive in assessing penalties to raise revenue.

BBQ_Mayor
10-06-2011, 09:44 PM
That sucks!! all this tax talk gets me all reved up. :x

I'd like to know how people get by with not paying taxes for years and never get caught yet somebody trying to do the right thing gets screwed.

PCDoctor_1979
10-06-2011, 10:29 PM
Call the IRS directly - should be a number on the notice. Same thing happened to us our first year. We called the IRS & they waived the penalty with the understanding we only get one free pass. We were more than a bit surprised at how reasonable they were.

My advice - call your local IRS office & explain "new S Corp - !st time filing - was not aware of officer penalties - etc." Hopefully they'll be understanding.


This is a good idea and your accountant should be able to help you get the penalty waived. If he (or she) is not willing to represent you before the IRS, it's time for a new accountant.

HBMTN
10-07-2011, 09:04 AM
Call the IRS directly - should be a number on the notice. Same thing happened to us our first year. We called the IRS & they waived the penalty with the understanding we only get one free pass. We were more than a bit surprised at how reasonable they were.

My advice - call your local IRS office & explain "new S Corp - !st time filing - was not aware of officer penalties - etc." Hopefully they'll be understanding.


You are my HERO Chachahut, I did what you said and called the IRS and told them exactly what you said and they waived all penalties because I was a 1st time filer. I thank you very much because I did not know how I was going to be able to pay them!!!!!!!!!!!!!!

ezoliver
10-07-2011, 10:25 AM
I can't stress enough the usefulness of SCORE as posted by the previous poster. They are there to help small businesses start, grow, and succeed.

They are a free resource that will be able to answer almost any question you may have about any part of your business.

They have free mentoring along with workshops and events that are VERY reasonably priced.

http://www.score.org/ :thumb:

Kings over Queens
10-07-2011, 11:28 AM
You are my HERO Chachahut, I did what you said and called the IRS and told them exactly what you said and they waived all penalties because I was a 1st time filer. I thank you very much because I did not know how I was going to be able to pay them!!!!!!!!!!!!!!Excellent news!

I was going to suggest that you go to the local office with some Que around lunch time to plead your case.

Glad it worked out.

bbqbandit70
10-07-2011, 01:01 PM
Having just formed my LLC sept. 1st I will discuss this with my wife (CPA) tonight.

Smiter Q
10-07-2011, 04:48 PM
Rough deal. Contact the IRS directly as other posted and beg for leniency,
After that... pick up phone book or google search for a new accountant.

watertowerbbq
10-19-2011, 08:56 PM
it amazes me how in a time when people are being laid off that they would stick it to you like this... not every buisness owner can afford a lawyer or even an accountant.then you have 2 extra jobs as an owner that you need to be responsible for. rules are there and meant to be followed. it sucks for OP, but the rules are the rules.

watertowerbbq
10-19-2011, 08:58 PM
You are my HERO Chachahut, I did what you said and called the IRS and told them exactly what you said and they waived all penalties because I was a 1st time filer. I thank you very much because I did not know how I was going to be able to pay them!!!!!!!!!!!!!!Great news!

Bigdog
10-20-2011, 02:13 PM
Great thread. :clap2::clap2::clap2: As I understand it, chachahut just saved HBMTN $1,100.:cool: This is one of the amazing things that can happen on a board like this. I am proud to just be one in this great group.

Now I have some suggestions for HBMTN.
1)Buy a subscription to this board.
2) Order a banner an fly it proudly and spread the word. You will be amazed at the great number of friends that you will find you now have.
3) PM chachahut, thank him again, ask for his address and send him something cool.
4)Be a good member and keep posting here.
5)Go to contests and meet more Brothers and Sisters
6)Enjoy life as Life is Good!:cool: