S Corp Late Filing Penalty: $255 Per Shareholder Per Month

S-Corp late filing penalty details:

1. The penalty. $255 per shareholder per month (or fraction of a month) the return is late, up to 12 months, for returns required to be filed in 2026. The amount is adjusted annually for inflation: it was $245 for returns due in 2025 and is $260 for returns due in 2027.

   • 1 shareholder, 1 month late: $255
   • 1 shareholder, 3 months late: $765
   • 2 shareholders, 6 months late: $3,060
   • 4 shareholders, 12 months late: $12,240

2. Filing deadline. Form 1120-S is due on the 15th day of the 3rd month after the end of the tax year. For calendar-year S-Corps: March 15. An automatic 6-month extension (Form 7004) extends the deadline to September 15.

3. What triggers the penalty:

   • Filing after March 15 (or September 15 if extended) without an extension
   • Filing an extension but then filing after September 15
   • Filing a return that’s incomplete (missing K-1s, missing schedules)
   • Failing to include all required information (the return is treated as not filed)

4. First-time penalty abatement (FTA):

   • Available if the taxpayer has filed timely and paid timely for the 3 prior tax years
   • No specific reason needed; just a clean compliance history
   • Request by phone (calling the IRS) or by letter
   • The IRS grants FTA liberally for S-Corp late filing penalties
   • Starting summer 2026, FTA is moving to Automatic Exemption from Penalty (AEP) for 2025 tax year returns and later. The IRS lists the S-Corp late filing penalty (IRC 6699(a)(1)) as eligible, and under AEP the penalty isn’t assessed at all if the three prior years are clean

5. Reasonable cause abatement:

   • If FTA is not available, the taxpayer can argue reasonable cause (IRC 6699(a))
   • Reasonable cause examples: death, serious illness or unavoidable absence of the taxpayer or immediate family, fire or natural disaster, inability to obtain necessary records
   • NOT reasonable cause: “I didn’t know it was due,” “I thought my accountant filed it,” “I was busy”
   • Written explanation attached to Form 1120-S or sent in response to the penalty notice

6. Rev. Proc. 2013-30 relief. For S-Corps that made a late S election AND filed the S-Corp return late, Rev. Proc. 2013-30 provides streamlined relief if certain conditions are met (the entity intended to be an S-Corp from the effective date, and shareholders reported income consistently).