Instructions For Form 1120-Reit - 2011 (Page 4 of 16) in pdf

•

due. If the REIT uses a third party to

penalty will not be imposed if the REIT

Accrual, or

•

make deposits on its behalf, they may

can show that the failure to pay on time

Any other method authorized by the

have different cutoff times.

was due to reasonable cause.

Internal Revenue Code.

Reasonable cause determinations. If

Same-day wire payment option. If the

Accrual method. Generally, a REIT

REIT fails to initiate a deposit transaction

the REIT receives a notice about interest

must use the accrual method of

on EFTPS by 8 p.m. Eastern time on the

and penalties after it files its return, send

accounting if its average annual gross

day before the date a deposit is due, it

the IRS an explanation and we will

receipts exceed $5 million. See section

can still make the deposit on time by

determine if the REIT meets the

448(c).

reasonable cause criteria. Do not attach

using the Federal Tax Application (FTA).

Under the accrual method, an amount

Before using the same-day wire payment

an explanation when the REIT’s return is

is includible in income when:

option, the REIT will need to make

filed.

1. All the events have occurred that fix

arrangements with its financial institution

Trust fund recovery penalty. This

the right to receive the income, which is

ahead of time. Please check with the

penalty may apply if certain excise,

the earliest of the date:

financial institution regarding availability,

income, social security, and Medicare

a. the required performance takes

deadlines and costs. To learn more about

taxes that must be collected or withheld

place,

making a same-day wire payment and

are not collected or withheld, or these

b. payment is due, or

download the Same-Day Payment

taxes are not paid. These taxes are

c. payment is received, and

Worksheet, visit

generally reported on:

•

2. The amount can be determined

Form 720, Quarterly Federal Excise

Estimated Tax Payments

with reasonable accuracy.

Tax Return;

•

Form 941, Employer’s QUARTERLY

Generally, the following rules apply to the

See Regulations section 1.451-1(a) for

Federal Tax Return;

REIT’s payments of estimated tax.

details and Pub. 538, Accounting Periods

•

Form 943, Employer Annual Federal

The REIT must make installment

and Methods.

Tax Return for Agricultural Employees;

payments of estimated tax if it expects its

•

Change in accounting method.

Form 944, Employer’s ANNUAL

total tax for the year (less applicable

Generally, the REIT must get IRS consent

Federal Tax Returns; or

credits) to be $500 or more.

•

to change the method of accounting used

•

Form 945, Annual Return of Withheld

The installments are due by the 15th

to report taxable income (for income as a

Federal Income Tax.

day of the 4th, 6th, 9th, and 12th months

whole or for the treatment of any material

of the tax year. If any date falls on a

The trust fund recovery penalty may

item). To do so, the REIT generally must

Saturday, Sunday, or legal holiday, the

be imposed on all persons who are

file Form 3115, Application for Change in

installment is due on the next regular

determined by the IRS to be responsible

Accounting Method. See Form 3115 and

business day.

for collecting, accounting for, and paying

Pub. 538, Accounting Periods and

•

Use Form 1120-W, Estimated Tax for

over these taxes, and who acted willfully

Methods, for more information.

Corporations, as a worksheet to compute

in not doing so. The penalty is equal to

estimated tax.

There are some instances when the

the full amount of the unpaid trust fund

•

If the REIT overpaid its estimated tax, it

REIT can obtain automatic consent from

tax. See the Instructions for Form 720 or

may be able to get a quick refund by filing

the IRS to change to certain accounting

Pub. 15 (Circular E), Employer’s Tax

Form 4466, Corporation Application for

methods. See Rev. Proc. 2011-14,

Guide, for details, including the definition

Quick Refund of Overpaid Estimated Tax.

2011-4 I.R.B. 330, as modified, or its

of responsible persons.

The overpayment must be at least 10% of

successor. Also see the instructions for

Failure to ascertain ownership. If the

the REIT’s expected income tax liability

Form 3115.

REIT fails to comply with Regulations

and at least $500.

Section 481(a) adjustment. If the

section 1.857-8 for ascertaining

For more information, including

REIT’s taxable income for the current tax

ownership and maintaining factual

penalties, see the instructions for line 25,

year is figured under a method of

ownership records for a tax year, it must

Estimated Tax Penalty.

accounting different from the method

pay a $25,000 penalty ($50,000 for

used in the preceding tax year, the REIT

intentional disregard) upon notice and

Interest and Penalties

may have to make an adjustment under

demand by the IRS. If the REIT can show

section 481(a) to prevent amounts of

that the failure was due to reasonable

Interest. Interest is charged on taxes

income or expenses from being

cause, the penalty may not be imposed.

paid late even if an extension of time to

duplicated or omitted. This is referred to

For more information, see section 857(f).

file is granted. Interest is also charged on

as a “section 481(a) adjustment.” The

Failures to satisfy certain REIT

penalties imposed for failure to file,

section 481(a) adjustment period is

qualification provisions. If the REIT is

negligence, fraud, substantial valuation

generally 1 year for a net negative

required to pay the $50,000 penalty under

misstatements, and substantial

adjustment and 4 years for a net positive

section 856(g)(5)(C) for each failure to

understatements of tax from the due date

adjustment. However, a REIT can elect to

satisfy a REIT qualification provision of

(including extensions) to the date of

use a 1-year adjustment period if the net

sections 856 – 859 (other than section

payment. The interest charge is figured at

section 481(a) adjustment for the change

856(c)(2), 856(c)(3), or section 856(c)(4))

a rate determined under section 6621.

is less than $25,000. The REIT must

due to reasonable cause and not willful

Late filing of return. A REIT that does

complete the appropriate lines of Form

neglect, see the instructions for Schedule

not file its tax return by the due date,

3115 to make the election. Also, under

J, line 2f, later.

including extensions, may be penalized

certain other conditions, the REIT can

Other penalties. Other penalties can be

5% of the unpaid tax for each month or

modify the period for taking into account a

imposed for negligence, substantial

part of a month the return is late, up to a

net positive section 481(a) adjustment.

understatement of tax, reportable

maximum of 25% of the unpaid tax. The

See Rev. Proc. 2009-39 and Rev. Proc.

transaction understatements, and fraud.

minimum penalty for a return that is over

2011-14.

See sections 6662, 6662A, and 6663.

60 days late is the smaller of the tax due

Note. Include any net positive section

or $135. The penalty will not be imposed

Accounting Methods

481(a) adjustment on page 1, line 7.

if the REIT can show that the failure to file

Report any negative adjustment on page

on time was due to reasonable cause.

Figure taxable income using the method

1, line 18.

of accounting regularly used in keeping

Late payment of tax. A REIT that does

the REIT’s books and records. In all

not pay the tax when due generally may

Accounting Period

cases, the method used must clearly

be charged a penalty for the failure to pay

show taxable income.

tax. The amount of the penalty is

of 1%

A REIT must figure its taxable income on

of the unpaid tax for each month or part of

Generally, permissible methods

the basis of a tax year. A tax year is the

a month the tax is not paid, up to a

include:

annual accounting period a REIT uses to

•

maximum of 25% of the unpaid tax. The

Cash,

keep its records and report its income and

-4-

Instructions For Form 1120-Reit - 2011 Page 4

Related Articles

Related forms

Related Categories