What happens if Schedule RT is not filed in cases where it is required?
The answer depends on what type of related entity expenses should have been reported on Schedule RT. A Wisconsin deduction will not be allowed for related entity interest or rental expenses if a taxpayer fails to report them on Schedule RT when required. For related entity expenses other than interest or rent, a deduction may still be allowed if a taxpayer fails to file Schedule RT, but if additional tax is subsequently discovered, a penalty of 25% of the additional tax may apply if the failure to meet all requirements was not due to good cause. If any interest or rental expense is not allowed as a deduction because the taxpayer failed to file Schedule RT, the related entity to whom the taxpayer paid, accrued, or incurred the expense may exclude the resulting income from its Wisconsin income. In order for this exclusion to apply, the taxpayer must complete Schedule RT-1, Statement of Disallowed Related Entity Interest Expense or Rental Expense, and provide it to the related entity. The
