When S corporations fail to file Form 1120S by the due date or extended due date, the IRS imposes a minimum penalty of $205 for each month or part of month late, multiplied by the shareholders.
To file a late S election, attach Form 2553 to current year Form 1120S, within three years and 75 days of the intended S-Corp election date.
S Corporation Election Deadline
For valid 2021 S Corp election, existing LLCs and C Corporations (with January 1 tax year) need to file IRS form 2553 no later than March 15, 2021.
Penalties: Filing Late vs. Paying Late
One penalty applies for filing late. Another penalty applies for paying late. Interest accrues on penalties.
The IRS charges 5% of unpaid tax per month for the first five months for late filing C corporation 1120 – up to 25% of the tax bill. The IRS also charges interest until the balance is paid.
Penalties Under Corporation Tax Act 2010
Section 12AC of the Corporation Tax Act 2010 addresses late filing penalties. It outlines the calculation of penalties based on delay duration and company size to incentivize on-time corporation tax return filing for compliance.
Examples of Late Filing Penalties
The penalty for failure to file S corporation Form 1120S, or to provide complete information, is $195 per shareholder per month (maximum 12 months).
- If no tax due when S corporation return is filed late, the penalty is $195 per month or part of month late multiplied by corporate shareholders.
- Example: 3 shareholders, return 1 month late is $195 x 1 month x 3 shareholders = $585 total penalty.
Filing a return late with tax due leads the IRS to impose an additional 5% unpaid tax penalty each month or portion of the month unfilled.