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!
