Partnership failure to file penalty increased. Previously, any partnership required to file a return for any year, which failed to file on time (including extensions) or whose return failed to show the information required, was liable for a monthly penalty equal to $50 times the number of persons who were partners during any part of the tax year, for each month or fraction of a month for which the failure continued. However, the total penalty could not be imposed for more than five months.

The tax law changes extend the period for calculating the monthly failure-to-file-penalty for partnership returns from 5 to 12 months and increases the per-partner penalty amount from $50 to $85 per partner, effective for returns required to be filed after Dec. 20, 2007.

For tax years beginning in 2008 only, the dollar amount per partner is increased by $1. Thus, for tax years beginning in 2008, the per-partner penalty for failure to file a partnership return is $86.

New failure to file penalty for S corporation returns. Previously, there was no penalty for failure to file an S corporation return.

The tax law changes impose a monthly penalty for any failure to timely file an S corporation return or any failure to provide the information required to be shown on such a return, effective for returns required to be filed after Dec. 20, 2007. The penalty, assessed against the S corporation, is $85 times the number of shareholders in the S corporation during any part of the tax year for which the return was required, for each month (or a fraction of a month) during which the failure continues, up to a maximum of 12 months.

FUTA surtax extended through 2008. The Federal Unemployment Tax Act (FUTA) imposes a 6.2% gross tax rate on the first $7,000 paid annually by covered employers to each employee, consisting of a permanent tax rate of 6%, and a temporary surtax rate of 0.2%. Tax law changes provide that the temporary surtax rate (which amounts to $14 per worker) is extended through Dec. 31, 2008. Thus, the FUTA rate remains at 6.2% through the end of 2008.

Please note that the information contained in this summary is intended for informational purposes only and is not to be considered tax/legal advice. For specific advice, please contact the Law Offices of William H. Copperthwaite Jr., L.L.C.