Beware Of Disclosure And Failure To File Penalties!

Entities such as trusts and exempt organizations face penalties for failing to meet disclosure deadlines or file tax returns. A tax professional qualified with the necessary and required knowledge and experience may assist all taxpayers, whether an individual or business, meet all requirements related to filing and disclosure. Hopefully, this occurs well before any deadline, but even if delinquent, a tax professional’s assistance is valuable, perhaps even more so at this point in time.

In the case of failure to file a return, the addition to tax under § 6651(a)(1) is not less than the lesser of $210 or 100% of the amount required to be shown on the return. The penalties under § 6652(c) for certain exempt organizations and trusts failing to file returns, disclosures, etc., which are required to be filed in the calendar year 2017, are:

  • Returns Under § 6033(a)(1) or § 6012(a)(6)
Scenario Penalty Per Failure Per Day Maximum Penalty Per Return
Penalty on Organization (§ 6652(c)(1)(A))  $20 Lesser of (i)$10,000 or (ii) 5% of gross receipts for year
Penalty on Organization with Gross Receipts Greater than $1,028,500 (§ 6652(c)(1)(A))

 

 $100 $51,000
Penalty on Managers (§ 6652(c)(1)(B)(ii))

 

 $10 $5,000
Public Inspection of Annual Returns and Reports (§ 6652(c)(1)(C))

 

 $20 $10,000
Public Inspection of Applications for Exemption and Notice of Status (§ 6652(c)(1)(D))  $20 No limit

Note in these cases both the organization and manager may be assessed penalties. 

 

  • Returns Under § 6034 or § 6043(b)
Scenario Penalty Per Failure Per Day Maximum Penalty Per Return
Penalty on Organization or Trust (§ 6652(c)(1)(A)) $10 $5,000
Penalty on Managers (§ 6652(c)(2)(B)) $10 $5,000
Penalty on Split Interest Trust (§ 6652(c)(2)(C)) $20 $10,000
Split Interest Trust with Gross Income Greater than $257,000 (§ 6652(c)(2)(C)(ii)) $100 $51,000

Note in these cases both the entity and manager may be assessed penalties.

 

  • Disclosure Under § 6033(a)(2)
Scenario Penalty Per Failure Per Day       Maximum Penalty Per Return
Penalty on Tax-Exempt Entity (§ 6652(c)(3)(A)) $100 $51,000
Failure to Comply with Demand (§ 6652(c)(3)(B)(ii)) $100 $10,000

The aforementioned penalties are all costly . . . and unnecessary. Operating a business organization or administering a trust both involve careful planning, which includes meeting important requirements imposed and mandated by federal law. A tax professional may ensure that all federal and state requirements are met.

It is wise for both individual and business taxpayers to consult with a tax professional to help meet and necessary filing and disclosure requirements before the fact. If you are delinquent with meeting any of these requirements or just have any question about taxes, please call THE TAX EXPERTS at the Thorgood Law Firm at 212-490-0704 for assistance or learn more online at www.thorgoodlaw.com. The consultation is FREE!Beware Of Disclosure And Failure To File Penalties!

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