[Missy]

If company A acquires 100% of the stock of company B and they do intend to file consolidated taxes going forward, I know company B has to file a short year tax form through the acquisition date.

If company B fails to file this short year tax return by the due date, what are the penalties and consequences and to who?

I’ve googled this to death, and maybe not using the correct search terms.

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[TommyTheCat]

if company B fails to file by the filing deadline that is predicated off of the short period accounting period end date, the penalties and filing obligation rest with the former owner, not the acquiring entity.

AUD - 85
BEC - 89
FAR - 91
REG - 97

[Missy]

Thank you so much that was EXACTLY what I needed to know.

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[TommyTheCat]

sure thing. I should have mentioned though…this could still create headaches for the acquiring company in that the IRS or state jurisdiction could suspend the right to do business in the state or levy the new parent to satisfy the debt. From a legal perspective the liability and obligation lies with the former owner, but in practice it could present a situation where the acquirer pays the obligation and then seeks repayment from the former owner via tort or other action.

AUD - 85
BEC - 89
FAR - 91
REG - 97

[Missy]

Thanks! I also suppose the acquiring company will need a copy of the short year filing at year end to file the year end together for the rest of the year.

I'm sure I'll get all the details eventually but I'm a less than patient person LOL. Thanx again for the info!

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[xlukixsz]

Hi,
Also, just to make it more complicated if the company was a publicly traded company than most likely the obligation and potential liabilities, penalties, etc. will be with the acquiring company. I am sure IRS will not go after the previous shareholders. I would also read a acquisition agreement (if you can get your hands on) , it will usually list who is responsible for pre-acquisition tax obligations.

[Author]

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