Business Tax Preparation · Advising the business taxpayer

Reporting and filing obligations (e.g., extended returns and potential penalties, international information returns, Form 1099 series, Form 8300)

A business that owes no tax can still owe a great deal in penalties, because the largest exposures in this topic attach to filing rather than to paying. Two features do most of the damage: the pass-through late filing penalties are charged per owner, and the information return penalties are charged per document.

The rule

When returns are due. a partnership return under IRC § 6031 and an S corporation return under IRC §§ 6012 and 6037 are due the 15th day of the third month after the close of the year; an income tax return under IRC §§ 6012, 6013 or 6017 is due the 15th day of the fourth month^TY2026 (IRC § 6072(a) and (b)).

Extensions. a reasonable extension of time may be granted for any return, and except for taxpayers abroad it may not exceed 6 months — with an automatic 6-month extension for a corporation that files the prescribed form and pays its properly estimated tax by the original due date^TY2026 (IRC § 6081(a) and (b)), and the condition that is always tested: the corporate automatic extension is conditioned on paying the properly estimated tax by the date prescribed for payment — an extension of time to file has never been an extension of time to pay^TY2026.

Late filing a pass-through return. the penalty applies where a partnership required to file under IRC § 6031, or to file a partnership adjustment tracking report under IRC § 6226(b)(4)(A), fails to file at the time prescribed determined with regard to any extension, or files without the required information — for each month or fraction of a month the failure continues, up to 12 months, unless due to reasonable cause. It is in addition to the IRC § 7203 penalty for wilful failure to file (IRC § 6698(a))^TY2026 (IRC § 6698(a)), the amount being the monthly amount is the statutory figure multiplied by the number of persons who were partners in the partnership during any part of the taxable year — so the count is of everyone who was a partner at any point, not of those who were partners at the year end (IRC § 6698(b))^TY2026 (IRC § 6698(b)) at $260 per partner per month for each month or fraction of one during which the failure continues, capped at 12 months, unless the failure is due to reasonable cause — the statute prints $195 and IRC § 6698(e) indexes it, rounding down to a multiple of $5 (IRC § 6698; Rev. Proc. 2025-32 § 3.55, for returns required to be filed in 2027)^TY2026. The S corporation mirror is $260 per shareholder per month for each month or fraction of a month the failure continues, up to 12 months, unless due to reasonable cause — the statute prints $195 and IRC § 6699(d) indexes it^TY2026 (IRC § 6699(b); Rev. Proc. 2025-32 § 3.56).

Information returns. for a failure relating to a return required to be filed in 2027, the penalty is $340 per return with a calendar year maximum of $4,191,500 — or $1,397,000 for a person whose average annual gross receipts for the most recent three taxable years are $5,000,000 or less. Corrected within 30 days of the required filing date the penalty is $60, capped at $698,500 or $244,500; corrected after that but on or before 1 August it is $130, capped at $2,095,500 or $698,500 (IRC § 6721(a), (b), (d))^TY2026 (IRC § 6721; Rev. Proc. 2025-32 § 3.57), and the matching payee statement penalty for a failure relating to a payee statement required to be furnished in 2027, the penalty is $340 per statement with a calendar year maximum of $4,191,500 — or $1,397,000 for a person whose average annual gross receipts for the most recent three taxable years are $5,000,000 or less. Corrected within 30 days of the required furnishing date the penalty is $60, capped at $698,500 or $244,500; corrected after that but on or before 1 August it is $130, capped at $2,095,500 or $698,500 (IRC § 6722(a), (b), (d))^TY2026 (IRC § 6722; § 3.58). Where the failure is deliberate the tiers fall away: for intentional disregard, the greater of $690 or 10 percent of the aggregate amount required to be reported correctly, with no calendar year limit (IRC § 6721(e)(2)(A), as adjusted for returns required to be filed in 2027)^TY2026 (IRC § 6721(e)(2)(A)).

Cash received in a trade or business. $10,000 — any person engaged in a trade or business who in the course of it receives more than that amount in cash in one transaction, or in two or more related transactions, must make a return showing the name, address and taxpayer identification number of the person from whom the cash was received, the amount, and the date and nature of the transaction (IRC § 6050I(a), (b))^TY2026 (IRC § 6050I(a) and (b)), with the report must be filed by the 15th day after the date the cash is received (Reg. § 1.6050I-1(e)(1)); the written statement to each person named on it, showing the filer information contact and the aggregate amount of cash received, must be furnished on or before 31 January of the year following the calendar year for which the return was required (IRC § 6050I(e))^TY2026.

International information returns. $10,000 for each annual accounting period for which a United States person fails to furnish the required information about a foreign business entity, with a further $10,000 for each 30-day period the failure continues more than 90 days after notice^TY2026 (IRC § 6038(b)); {fig:file.6038A} (IRC § 6038A(d)); and {fig:file.6038D} (IRC § 6038D(d)).

Current figures

How it works in practice

Count the owners, then multiply. The pass-through penalties are the ones clients least expect, because they scale with the ownership rather than with the tax. A twelve-partner partnership four months late owes forty-eight monthly units, and it owes them even if the partnership had a loss. Note the count is of everyone who was a partner during any part of the year, not the partners at year end.

An extension buys time to file, never time to pay. IRC § 6081(b) makes the corporate automatic extension conditional on paying the properly estimated tax by the original payment date, and the failure-to-pay penalty and interest run from that date regardless of any extension. The habit of saying “we extended” as though it disposed of the question is the source of most of the surprises.

Reasonable cause is the only exit from §§ 6698 and 6699, and it is a statutory element rather than an administrative concession — both provisions say the penalty does not apply if the failure is due to reasonable cause. For a small partnership the historical Rev. Proc. 84-35 relief route rests on the same footing.

Correct information returns quickly, because the tiers are steep. The penalty falls to the lowest tier if corrected within 30 days of the required filing date and to the middle tier if corrected by 1 August. Past that date the general rule applies. The economics almost always favour filing an imperfect return on time and correcting it, over filing a perfect one late.

Intentional disregard removes both the tiers and the cap. The penalty becomes the greater of a fixed floor or a percentage of the amount that should have been reported correctly, with no calendar year maximum at all — and for a Form 8300 failure the floor and the measure are far higher again.

International information returns carry the largest per-form penalties in the subtitle, and they apply to information rather than to tax. A domestic company with one foreign subsidiary and no foreign tax liability can accrue five figures a year by failing to file a form nobody billed for. The continuation penalties after notice compound this, running per 30-day period.

Scenarios

Traps

How this has changed

The due dates moved in 2015. The Surface Transportation and Veterans Health Care Choice Improvement Act pulled the partnership return forward to the 15th day of the third month and pushed the C corporation return back to the 15th day of the fourth, reversing the previous order so that a Schedule K-1 would ordinarily reach a partner before that partner’s own return was due. The S corporation date did not move.

The information return penalties have been indexed since 2015 and have risen steadily; the underlying statutory figures are far lower, so a source quoting the Code text rather than the annual revenue procedure understates them substantially. The same is true of §§ 6698 and 6699, where the statute prints one figure and the indexed amount is materially higher.

The Form 1099-K reporting threshold has moved repeatedly and is the most volatile item in this area. The reduced single-dollar threshold enacted in 2021 was deferred by successive notices and then undone, restoring the aggregate and transaction count test. Preparers should check the threshold for the year in question rather than relying on memory.

Nothing in the post-2024 legislation alters the due dates, the extension rules or the international information return penalties.

Exam focus

Know the three due dates and which entity gets which, and know that an extension runs 6 months and is conditioned on payment for a corporation.

For the pass-through penalties, memorise the structure rather than the number: monthly figure, multiplied by owners at any time in the year, for each month or fraction up to 12, unless reasonable cause. Expect a computation.

For information returns, know the three correction tiers and their deadlines — within 30 days, by 1 August, thereafter — and that IRC § 6721 and IRC § 6722 stack.

Know the IRC § 6050I trigger — $10,000 — any person engaged in a trade or business who in the course of it receives more than that amount in cash in one transaction, or in two or more related transactions, must make a return showing the name, address and taxpayer identification number of the person from whom the cash was received, the amount, and the date and nature of the transaction (IRC § 6050I(a), (b))^TY2026 — together with the 15-day filing deadline and the 31 January statement to the payer.

Finally, be able to name the three main international information return penalties by the form they sit behind and note that each has a continuation penalty running per 30-day period after notice.

Check yourself

1. An S corporation with four shareholders files three months late with no reasonable cause. How is the penalty computed, and does it matter that the corporation had no taxable income?

Answer: The monthly figure multiplied by four shareholders, for three months — twelve monthly units. It does not matter that there was no taxable income: IRC § 6699(a) triggers on the failure to file or on filing without the required information, and § 6699(b) computes the amount by reference to the number of persons who were shareholders during any part of the year. The only relief in the provision itself is reasonable cause.

2. A corporation files Form 7004 on time but pays nothing, then files its return and pays five months later. What has the extension achieved?

Answer: Less than the taxpayer thinks, and possibly nothing. IRC § 6081(b) conditions the automatic 6-month extension on the corporation paying the amount properly estimated as its tax on or before the date prescribed for payment. Even where the extension holds and the late filing penalty is avoided, the failure-to-pay penalty and interest run from the original payment date, because an extension of time to file has never been an extension of time to pay.

3. A business fails to file 200 Forms 1099-MISC covering $900,000 of payments, and the Service concludes the failure was deliberate. Is the penalty 200 times the general per-return amount?

Answer: No, it is likely far more. Intentional disregard under IRC § 6721(e)(2)(A) makes the penalty the greater of a fixed floor per return or a stated percentage of the aggregate amount required to be reported correctly, with no calendar year maximum — for intentional disregard, the greater of $690 or 10 percent of the aggregate amount required to be reported correctly, with no calendar year limit (IRC § 6721(e)(2)(A), as adjusted for returns required to be filed in 2027)^TY2026. On $900,000 of payments the percentage measure produces a five-figure sum standing against 200 times the general per-return figure, and whichever is greater applies, uncapped. The correction tiers are also unavailable, so filing late does not reduce it.

4. A restaurant receives $6,000 in cash from one customer on Monday and $5,500 from the same customer on Thursday for a linked event booking. Is a Form 8300 required?

Answer: Yes. IRC § 6050I(a) reaches more than $10,000 received in one transaction or in two or more related transactions, and two payments for the same booking are related. The aggregate of $11,500 clears the threshold, so the return is due by the 15th day after the receipt that took the total over it, and a written statement must reach the customer by 31 January of the following year. Splitting a payment across days is precisely what the related transactions language exists to catch.

5. Why do the international information return penalties bite hardest on companies with no foreign tax liability?

Answer: Because they are penalties for failing to supply information, not for underpaying tax. IRC § 6038(b), § 6038A(d) and § 6038D(d) each impose a fixed amount per period or per year for the failure itself, with a continuation penalty for each 30-day period after notice — none of which is measured by any tax. A domestic company whose foreign subsidiary is dormant has nothing to pay and everything to file, and is exactly the taxpayer most likely to conclude the form does not matter.