The Internal Revenue Service announced this week that it has extended the grace period allotted for small business owners to pay certain tax-shelter penalties. It is the second time the IRS has extended the deadline, the first time being in July when the deadline was set for the end of September.
The extensions have less to do with the ability or inability of small businesses to pay the penalties and more to do with passage of potential new law that will change small business responsibility regarding the tax-shelter penalties. The initial delay in collecting the penalty fees was enacted in order to afford Congress a extra time to pass legislation that would actually create long-term protection for small business owners from being responsible for the penalties.
What does this mean for small businesses?
The bulk of the penalties have been associated with small business pension or benefits plans. And some penalties, assessed for pension plans that were created on the advice of experts and which received prior approval from the IRS, have been for over $1 million–a hefty sum for a small business trying to weather a tough economy. Though the payment extension may mean more money in the bank to help small businesses through the holidays, you can bet that small business owners will continue to keep a close eye on Washington to find out their ultimate liability regarding the tax-shelter penalties.
Related Resources:
- IRS Extends Grace Period On Small Business Penalties (Wall Street Journal)
- Small-Business Owners Fret Over Large IRS Fines (Wall Street Journal)
- Tax News (provided by Weisberg and Kainen)
- Taxation Law Overview (provided by Kathleen M Newman & Associates PA)
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