Business Tax Penalties and Interest

[Mari_325]

Business tax return - During 2019 we had to pay Fed, State, and State Unemployment penalties and interest for filing late or not filing a return from various periods during the last two years due to no fault of ours - I'll just say that we no longer have that accountant.  Can I deduct those penalties and interest in our 2019 1120S business tax return?  If so, would these be under payroll taxes or miscellaneous?  Thank you

[DavidS127 · Accepted solution]

The penalties you paid in 2019 are not deductible by the business, and "additional interest" is treated as a penalty and cannot be deducted.  You can deduct the interest portion that is not considered "additional interest" if the tax debt is for the business.  You cannot deduct interest related to your personal income taxes.

See IRS Publication 535 for more details.