Compliance Responsibilities

Question 1

Tax underpayment definition

Answer 1

The difference between the tax due and the amount of tax paid on or before the filing of the return plus credits.

Question 2

When are estimated corporate tax payments due

Answer 2

When annual tax payments are at least $500

Question 3

When is there no tax underpayment penalty for corporations

Answer 3

When payments are at least equal to the lower to 100% of current year’s tax, or 100% of the preceding year’s tax.
The penalty can also be avoided if the annualization exception is met. Any net operating loss from the preceding year doesn’t allow to use that previous year’s tax liability

Question 4

When can a corporation not base estimated payments on the preceding year

Answer 4

1) Filed a return that did not show a tax liability for that year 2). Preceding year was < 12 months 3). Corporation had taxable income > 1 million

Question 5

What documentation is a preparer required to retain

Answer 5

1). FIN 2). Copy of the return