Tuesday, February 22, 2011

Can a company deduct interest paid to IRS?

Q: If a company pays a penalty plus interest to IRS for a late tax deposit, can the company deduct the interest as an expense?
A: Interest paid by individuals is not deductible, so S-corporations, partnerships and LLCs cannot claim that deduction since they are "flow-through" entities where the tax liability flows through to the individual owners. "C" type corporations can deduct the interest paid to IRS however, since they are treated as a separate entity.

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