What Penalty Is There for Corporation's Failure To File
Corporations that fail to timely file an income tax return are subject to a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. When there is $0 owed, the maximum penalty that can be assessed is $0.
Penalties such as criminal sentencing (i.e. jail time) are extremely rare due to a corporation's failure to file. There must be proven tax fraud (more than $0 owed) and proven willfulness (proving one's mindset beyond a reasonable doubt) for there to be a willful failure to file. Corporate criminal charges are typically found in demonstrative fraud cases. Using Enron as an example, where 21 officers and managers were sentenced to prison, the worst of them receiving 12 years in prison and the average receiving ~2 years.
Criminal charges for failure to file are more often found in the realm of personal tax returns. Further, one can only face prison time if the IRS has pursued a criminal judgment. Willfully refraining from filing a tax return is illegal, when it is required, such as is the case with corporations and LLCs taxed as corporations. Accidentally failing to file is a whole different ball game. In most cases, the IRS uses civil judgments.
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