Your 2014 financial statements are ready. Your accountant just put the finishing touches on your business’s tax return. It’s time to file.
Before filing, you should know that a form signed by anyone other than those authorized under the tax laws will invalidate the return and result in penalties.
Corporations file Form 1120, or 1120S when an “S” election is in effect. These forms must be signed by one of the following: the president, vice president, treasurer, assistant treasurer, chief accounting officer or any other officer (such as a tax officer) who is authorized to sign. Simple enough.
Signatory selection for partnerships and LLCs is more complicated, in no small part due to conflicting guidance from the IRS. Some of the guidance indicates that any partner can sign the return, but other guidance states that the return must be signed by a general partner or LLC member-manager. Until further clarification, the general partner of the LLC or a member-manager should sign the return. A paid return preparer may not sign in place of the general partner, except in cases of disease, injury, continuous absence from the U.S. for a period of at least 60 days prior to the date required by law for filing the return, or specific permission granted by the IRS for other good causes.
For LLCs taxed as partnerships, a member-manager is “any owner of an interest in the LLC who, alone or together with others, has the continuing authority to make the management decisions necessary to conduct the business for which the LLC was formed.” Some LLCs will have managers that do not hold LLC interests and it would seem they would have the authority to sign, but that is not the case, according to the IRS. If the LLC is managed by a manager, but none of its managers hold an interest, the LLC should designate one of the members as a manager in order to ensure the return is properly signed.
LLCs taxed as corporations, or S Corporations that have officers, would follow the rules for corporations listed above – those without officers would have the managing-member or manager sign the tax return.
There are potentially grave consequences if the wrong person signs your organization’s return. First, the normal three-year statute of limitations period for the IRS to assess your taxes will be tolled indefinitely. That’s because your improperly signed return is deemed no return at all. Second, there are penalties, interest, and fees associated with failing to file a valid return, all of which will accrue until the IRS assesses your tax liability. Note that for flow through returns, penalties are assessed for not filing schedule K-1s.
So, get it right the first time.
If you have questions regarding your proper signatory, or any other tax matter, please contact one of our experienced tax attorneys. For assistance with identifying the best Warner tax attorney for you, call 616.752.2000.
