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Rhode Island Combined Return filers – Don’t get Caught Short with 2015 Estimated Tax Payments

April 16, 2015

Interest rates continue at historic lows, but you won’t know this by reading Rhode Island tax law.

Interest rates continue at historic lows, but you won’t know this by reading Rhode Island tax law. Corporate taxpayers who come up short on their estimated tax payments are charged a penalty computed at 18% interest. Not many lenders, at least not the legal ones, can still get away with charging 18% interest. Adding to the urgency of the matter is the requirement that 100% of the 2015 estimated tax payments need to be paid in by June 15, 2015.

Taxpayers that will be required to file a Rhode Island combined tax return for the first time in 2015 need to pay special attention to the estimated payment requirements. The Rhode Island law requires that your 2015 estimated tax payments be equal to the lesser of:

  • 100% of the tax due for 2014, plus any additional tax due to the combined reporting provisions of the new law; or
  • 100% of the 2015 tax liability.

Our informal conversations with the Division of Taxation have confirmed that to meet the “safe harbor” estimated payment using the 2014 tax a pro forma 2014 Rhode Island combined return needs to be prepared for the taxpayers that will be included in the actual 2015 combined return. If the tax computed on this pro forma 2014 return is greater than the tax paid on the actual separate company returns filed for 2014, then this higher amount of tax must be used as the “safe harbor” payment. Again, the cost of underpaying your 2015 estimated tax payments will be computed at the punitive interest rate of 18%.

The new Rhode Island law for combined filings is effective for tax years beginning on or after January 1, 2015. The change applies only to C corporations; S corporations, LLC’s and partnerships cannot be included in a combined tax return. The rules and regulations pertaining to combined filings are extremely complicated; the current exposure draft prepared by the Division of Taxation runs over 80 pages. This regulation is expected to be finalized in the near future.

All 2015 combined return filers should be taking a close look at their estimated tax payment due June 15th. We can assist you with applying the new combined return requirements to calculate the minimum estimated payment required to avoid a penalty. Questions? Contact us.

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