QUESTION
What is the shareholder's liability to S-Corp Tax Penalties and Interest?
Asked on Mar 16th, 2014 on Taxation - Michigan
More details to this question:
My husband owned an s-corp business that went under early 2011 due to the economy. Tax returns were for 2010 (income of $8,000) and 2011 (loss of $6,000) were filed late due to the fact that we did not have the money to hire an accountant to prepare the tax returns. Since it was an s-corp there were no taxes due however the s-corp received late filing penalties and interest. All assets had been sold way before deciding to close the business in an effort to save the business. When he finally decided to close, there was no money to cover outstanding debts so he had to continue to pay on these personally after the business closed as he had personally guaranteed them. My question is can the IRS go after my husband personally as the only shareholder of the company for this late filing tax penalty of the s-corp that is no longer in business?
3 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Corporate shareholders aren't liable for the corporation's debts. That would include any late filing penalty. The IRS can only try to collect from the corporation, since the corporation has no assets; the IRS is out of luck.
Answered on Mar 19th, 2014 at 10:24 AM
Probate Attorney serving St. Louis, MO
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Edward L. Armstrong, P.C.
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Yes, the IRS can "go after" your husband for the late filing fees and interest. In an "S" corporation, all tax liabilities pass through to the shareholders in proportion to their ownership interests.
Answered on Mar 18th, 2014 at 10:21 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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Yes, and generally, with good representation, it is possible to have the penalties waived but NOT the interest unless he is unable to pay on their criteria.
Answered on Mar 18th, 2014 at 9:30 AM