IRS Penalty for Late Filing Form 1120-S: 2026 S-Corp Costs & Abatement
The irs penalty for late filing form 1120-s is a monthly fee charged to S corporations that fail to submit their annual tax return by the deadline. For returns required to be filed in 2026, the base penalty is $255 per shareholder, per month (or part of a month) the return is late. This penalty applies even if the S corporation owes $0 in taxes, meaning a late form can quickly lead to thousands of dollars in debt regardless of your company’s profit.
In this guide, we will break down the calculation for 2026, explain the specific deadlines for S corporations, and show you how to request a penalty waiver through First-Time Abatement or Reasonable Cause. Knowing how the irs penalty for late filing form 1120-s works is essential for protecting your business’s cash flow from steep IRS “failure to file” assessments.
How the S-Corp Late Filing Penalty is Calculated
Because an S corporation is a “pass-through” entity, the IRS focuses on the number of shareholders rather than the amount of corporate income. The irs penalty for late filing form 1120-s is designed to penalize the delay in reporting information that affects the individual shareholders’ tax returns.
For the 2026 filing season, the IRS uses this formula:
- Per Shareholder Rate: $255 for each person who was a shareholder at any time during the year.
- Monthly Accumulation: The penalty is charged for each month or partial month the return is late, for up to 12 months.
- Additional Tax Penalty: If the S corporation owes taxes (such as built-in gains tax), a separate penalty of 5% of the unpaid tax per month may also apply.
Example: If an S corporation with 3 shareholders files its 2025 return 4 months late in 2026, the irs penalty for late filing form 1120-s would be $3,060 ($255 x 3 shareholders x 4 months).
Takeaway: The “per shareholder” multiplier makes this one of the most expensive administrative penalties the IRS issues to small businesses.
2026 S-Corp Deadlines You Must Know
To avoid the irs penalty for late filing form 1120-s, you must track the specific due dates for S corporations, which are earlier than individual 1040 deadlines.
- Original Deadline: For calendar-year S-corps, the deadline is **March 16, 2026** (since March 15 falls on a Sunday).
- Extension Deadline: By filing Form 7004 by March 16, you receive an automatic 6-month extension to **September 15, 2026**.
- Schedule K-1s: You are also required to provide a Schedule K-1 to each shareholder by the filing deadline. Failure to do so can result in an additional penalty of **$330 per K-1** in 2026.
2026 S-Corp Filing Timeline
| Event | Date | Penalty If Missed |
|---|---|---|
| Original Return / Extension Request | March 16, 2026 | $255/month per shareholder |
| Furnishing Schedule K-1s | March 16, 2026 | Up to $340 per K-1 |
| Extended Filing Deadline | Sept 15, 2026 | Back-dated monthly fees |
Quick Tip: An extension only gives you more time to file the paperwork; it does not extend the time to pay any taxes the corporation may owe.
Takeaway: Marking March 16 on your calendar is the most important step in protecting your S-corp from these fees.
How to Get an S-Corp Penalty Waived
If your business has already received a notice for an irs penalty for late filing form 1120-s, you may qualify for “Penalty Abatement”. The IRS offers two primary paths for relief in 2026:
- First-Time Abate (FTA): If your S corporation has filed all its returns on time for the last three years and has no other outstanding penalties, the IRS will often waive a first-time filing error as a courtesy.
- Reasonable Cause: If your company was late due to an extraordinary event—such as a natural disaster, a death or serious illness of a key officer, or a fire that destroyed records—you can submit an appeal for a waiver.
To request this relief, you can call the number on your IRS notice or file Form 843. Learn more about the difference between filing and payment issues in our Late Tax Payment Penalty guide or read About Us to see how we help businesses navigate IRS notices. You may also want to compare these costs with the partnership 1065 penalty rules.
Takeaway: S-corporations are eligible for the same First-Time Abate program as individuals, which can wipe out the entire late filing fee with one phone call.
Frequently Asked Questions
What is the minimum penalty for a return over 60 days late?
For tax returns required to be filed in 2026, if the S corporation owes tax and is more than 60 days late, the minimum penalty is the smaller of 100% of the tax due or $525. If no tax is due, the per-shareholder monthly penalty still applies.
Does the penalty apply if the corporation had no activity?
Yes. The IRS requires you to file Form 1120-S even if your S-corp had $0 in income and no expenses for the year. Failure to file a “zero-return” on time will still trigger the irs penalty for late filing form 1120-s per shareholder.
Can I avoid the penalty if I file a late extension?
No. Form 7004 must be filed on or before the original due date (March 16, 2026). If you submit an extension after that date, it is considered invalid, and the irs penalty for late filing form 1120-s will be charged starting from the original March deadline.
What happens if the IRS denies my abatement request?
If your initial request is denied, you have the right to appeal to the IRS Independent Office of Appeals. You should provide a written statement with any supporting evidence, such as medical records or insurance claims, to show you exercised “ordinary business care and prudence”.
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