How serious is a late/unfiled Form 966 for a dissolved S-corp? Will IRS penalize?

The good news is that late filing of Form 966 typically doesn't result in significant penalties for small S-corporations, especially when you've properly filed the final 1120-S. Form 966 is primarily an informational return that notifies the IRS of the corporate dissolution or liquidation plan. The IRS is generally more concerned that you've properly reported all income, paid all taxes owed, and correctly handled the distribution of assets to shareholders on your final 1120-S. If you've done that, the late Form 966 is unlikely to trigger penalties. That said, I would recommend filing the Form 966 now, even though it's late. Simply attach a brief statement explaining the reason for the late filing. This creates a complete record of your dissolution and helps avoid any future confusion about the status of your entity.

After struggling with a similar situation (late Form 966 filing and worrying about penalties), I found this amazing tool at https://taxr.ai that saved me tons of stress. I uploaded my dissolution documents and final 1120-S, and it analyzed everything and gave me a detailed breakdown of my specific situation. The analysis showed me that my penalty risk was minimal since I'd properly reported all asset distributions on the final return. It even gave me a template letter to include with my late Form 966 filing explaining the oversight. What I really liked was how it explained exactly what parts of my final 1120-S the IRS would be cross-checking against the Form 966.

I wanted to follow up on my skeptical comment about taxr.ai. I tried it out after continuing to get conflicting advice about my own dissolution situation, and I'm really glad I did. It identified that I had improperly characterized a distribution to myself as a shareholder, which could have triggered an audit. The tool provided super clear guidance on how to properly document everything and gave me a specific amendment strategy that minimized my exposure. What impressed me most was how it identified a timing issue with my distributions that none of the accountants I spoke with caught. Definitely worth checking out if you're dealing with business dissolution paperwork.

I had a nightmare trying to reach the IRS about my late Form 966 last year. Called dozens of times, spent hours on hold, and could never get through to someone who could actually answer my question about potential penalties. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - it's a service that gets the IRS to call YOU instead of waiting on hold forever. Used it and had an IRS business tax specialist call me within about 2 hours. She confirmed that for my S-corp, the late 966 wasn't a big deal since I'd properly reported the liquidation on Schedule D of the final 1120-S. She did recommend filing it with a brief explanation letter just to complete their records. Such a relief to get an actual definitive answer straight from the IRS!

I have to eat crow here. After my skeptical comment, I broke down and tried Claimyr because I was desperate to resolve my penalty notice. Within 3 hours I got a call from an actual IRS agent! She was able to access my file and clear up the whole situation. Turns out my Form 966 wasn't even the issue - they had misapplied a payment to the wrong tax year. For what it's worth, the agent told me that for small S-corps, they rarely pursue penalties for late Form 966 filings unless there's evidence of intentional tax avoidance. She recommended always filing it though, even late, with a brief explanation. What a relief to finally get this resolved after months of stress!

I'm a bit confused about Form 966 vs. the final 1120S. My accountant filed our final 1120S when we closed our S-corp last year but never mentioned Form 966. Do you absolutely need both? We've already distributed everything and I don't want to reopen a can of worms if it's not necessary.

What about state tax consequences of missing the Form 966? I dissolved my Scorp in 2023 but didn't file the 966 either, and now I'm getting letters from my state revenue department saying I owe penalties for unfiled state returns for 2024. I filed all my federal final returns correctly. Is this related?

I went through this exact same situation last year with my dissolved S-corp. I was 6 months late on filing Form 966 and was really stressed about potential penalties. Here's what I learned: The IRS rarely penalizes small S-corps for late Form 966 filings when you've properly handled everything else. Since you already filed your final 1120-S and distributed assets correctly, you're in good shape. Form 966 is mainly informational - it tells the IRS about your dissolution plan, but the real substance is in your final 1120-S. I'd definitely recommend filing the Form 966 now with a brief explanation letter. Something simple like "Form 966 filed late due to oversight. Final 1120-S was timely filed and all assets properly distributed." This creates a clean paper trail and shows good faith. One thing to watch out for - make sure your asset distributions on the Form 966 match what you reported on Schedule K-1 of your final 1120-S. Any discrepancies there could raise questions. Also double-check that you handled any built-in gains properly if you had appreciated assets. Don't stress too much about this. The IRS is way more concerned about unpaid taxes than late informational returns, especially for small businesses that clearly tried to do things right.

I had a very similar situation with my S-corp dissolution last year. I was about 10 months late filing Form 966 and was really worried about penalties. Here's what happened: I ended up filing the late Form 966 with a simple explanation letter stating it was an oversight and that all final tax returns had been properly filed. I never received any penalties or even acknowledgment from the IRS - they just processed it normally. The key thing is that you've already done the important parts correctly - filing the final 1120-S and properly distributing assets. Form 966 is really just a notification form. As long as your final 1120-S accurately reported all the liquidation distributions and you paid any taxes owed, the IRS typically doesn't pursue penalties for late Form 966 on small S-corps. My advice: Go ahead and file it now. Include a brief cover letter explaining the late filing was an oversight. Make sure the asset values and distribution dates on Form 966 match what you reported on your final 1120-S Schedule K-1. This will give you peace of mind and complete your dissolution paperwork properly. Don't lose sleep over this - you're in a much better position than if you had missed filing the final 1120-S or had unpaid taxes. The IRS focuses their enforcement efforts on bigger issues than late informational returns from properly dissolved small businesses.

I went through this exact situation with my S-corp dissolution about 18 months ago. I was nearly a year late filing Form 966 and was absolutely panicked about potential penalties, especially since I'd heard conflicting advice from different sources. Here's what actually happened: I filed the late Form 966 with a straightforward explanation letter stating it was an inadvertent oversight and that all final returns had been properly filed. The IRS processed it without any penalties or follow-up questions. No drama whatsoever. The reality is that Form 966 is primarily an informational return that notifies the IRS of your dissolution plan. Since you've already filed your final 1120-S and properly distributed assets, you've handled the substantive tax compliance requirements. The IRS is far more concerned about unpaid taxes and unreported income than late filing of informational forms for small businesses that clearly made good faith efforts to comply. My recommendation: File the Form 966 now with a brief cover letter explaining the late filing was an oversight. Make absolutely sure the asset values and distribution information on Form 966 matches what you reported on your final 1120-S - any discrepancies could trigger questions. But don't stress about penalties - in my experience and from what I've seen with others, the IRS doesn't pursue penalties for late Form 966 when everything else was handled correctly. You're going to be fine. The fact that you're concerned about doing things right puts you in a completely different category than the taxpayers the IRS actually goes after.

I'm dealing with a very similar situation right now - dissolved my S-corp about 6 months ago, filed the final 1120-S properly, but completely forgot about Form 966 until I was organizing my business files last week. Reading through everyone's experiences here has been incredibly reassuring! It sounds like the consensus is pretty clear: as long as you've handled the substantive tax compliance (final 1120-S, proper asset distributions, taxes paid), the IRS typically doesn't penalize small S-corps for late Form 966 filings. The form is more about notification than actual tax calculation. I'm planning to file mine this week with a simple explanation letter. One question though - for those who filed late, did you use any specific language in your explanation letter, or just keep it brief and straightforward? I want to strike the right tone - acknowledging the oversight without over-explaining or drawing unnecessary attention to it. Thanks to everyone who shared their experiences. It's such a relief to hear from people who actually went through this rather than just getting generic "consult a tax professional" advice everywhere else!

I'm going through this exact same situation right now! Closed my S-corp about 6 months ago, filed all the final returns properly, but completely spaced on Form 966 until I was cleaning out my business files last week. Reading through everyone's experiences here has been such a huge relief. It sounds like the key takeaway is that as long as you've handled the important stuff (final 1120-S, proper asset distributions, all taxes paid), the IRS really doesn't seem to care much about late Form 966 for small S-corps since it's primarily informational. I'm definitely going to file mine this week with a simple explanation letter. Based on what everyone shared, I'll keep it brief - just acknowledge the oversight and confirm that all the substantive tax requirements were handled properly. No need to over-explain or make it more complicated than it needs to be. Thanks to everyone who shared their real experiences instead of just generic advice! It's so much more helpful to hear from people who actually went through this process. I feel way less stressed about the whole thing now.

I just went through this exact situation about 6 months ago with my dissolved S-corp. I was nearly 9 months late filing Form 966 and was absolutely terrified about penalties, especially after reading some scary stories online about IRS enforcement. Here's what actually happened: I filed the late Form 966 with a simple explanation letter stating it was an oversight and that all final tax obligations had been met. The IRS processed it without any penalties, fees, or even follow-up correspondence. It was honestly anticlimactic after all my worry. The key insight I gained is that Form 966 is really just a notification to the IRS about your dissolution plan - the actual tax substance is in your final 1120-S. Since you've already filed that correctly and distributed assets properly, you've satisfied the important compliance requirements. The IRS seems to recognize this distinction and doesn't waste resources pursuing penalties on small S-corps for late informational filings when there's no tax avoidance involved. My advice: File it now with a brief, straightforward explanation letter. Don't overthink the wording - just acknowledge it was late due to oversight and confirm your final returns were properly filed. Make sure the asset values and dates on Form 966 match your final 1120-S to avoid any discrepancies that might raise questions. You're going to be fine. The pattern from everyone in this thread is clear - the IRS processes these late filings routinely without penalties for properly dissolved small businesses.

I'm in a very similar situation - dissolved my S-corp about 7 months ago and just realized I never filed Form 966! Reading through everyone's experiences here has been such a relief. It's clear that the IRS doesn't typically penalize small S-corps for late Form 966 filings when you've properly handled the substantive requirements. Like you, I filed my final 1120-S correctly and distributed all assets to shareholders. Based on what everyone's shared, it sounds like Form 966 is really just an informational notification rather than something that affects your actual tax liability. The consistent pattern from multiple people who were 6-12 months late seems to be: file it with a simple explanation letter, no penalties, no drama. I'm planning to file mine this week following the advice others gave - brief explanation acknowledging the oversight, confirm that final returns were properly filed, and make sure all the asset values match between the 966 and my final 1120-S. Thanks to everyone who shared their real experiences instead of just generic warnings - it's made this so much less stressful!

I'm dealing with this exact same situation right now! Dissolved my S-corp about 7 months ago and just discovered I never filed Form 966. This thread has been incredibly helpful - it's amazing to see so many people went through the same thing with consistently positive outcomes. What's really reassuring is the pattern everyone's describing: as long as you properly filed your final 1120-S and handled asset distributions correctly, the IRS seems to treat late Form 966 as a minor paperwork oversight rather than a serious compliance violation. The fact that multiple people were 6-12 months late and experienced no penalties gives me a lot of confidence. I'm going to follow the same approach that worked for everyone else - file the Form 966 this week with a simple explanation letter acknowledging the oversight and confirming that all final tax obligations were met. I'll also double-check that the asset values and distribution information match what I reported on my final 1120-S to avoid any potential discrepancies. Thanks to everyone who shared their real-world experiences instead of just generic advice. It's made this situation so much less stressful knowing that the IRS focuses their enforcement efforts on bigger issues than late informational returns from properly dissolved small businesses. Sometimes we really do overthink these things!

I'm in the exact same boat - dissolved my S-corp about 9 months ago and just realized I never filed Form 966! This thread has been an absolute godsend. I was honestly starting to panic after reading some horror stories online about IRS penalties, but seeing so many people with similar timelines who had zero issues is incredibly reassuring. What really gives me confidence is how consistent everyone's experiences have been - multiple people who were 6-12 months late, all filed with straightforward explanation letters, and none faced any penalties or follow-up from the IRS. It really does seem like when you've handled the substantive tax requirements properly (final 1120-S, proper asset distributions, all taxes paid), the IRS treats late Form 966 as exactly what it is - a minor paperwork oversight rather than a serious compliance violation. I filed my final 1120-S correctly and distributed all assets to shareholders, so based on everyone's experiences here, I should be in good shape. I'm going to file the Form 966 this week with a simple explanation letter following the template others shared - just acknowledge the oversight was inadvertent and confirm that all final tax obligations were properly handled. Thanks to everyone who shared their real-world outcomes instead of just theoretical warnings. Sometimes we really do overthink these situations when the reality is much more straightforward than we imagine. The IRS clearly has bigger fish to fry than chasing down late informational returns from small businesses that made good faith efforts to comply with everything else!

I went through this exact situation with my S-corp dissolution about a year ago. I was around 10 months late filing Form 966 and was absolutely stressed about potential penalties, especially after reading conflicting advice online. Here's what actually happened: I filed the late Form 966 with a simple explanation letter stating it was an inadvertent oversight and that all final tax returns had been properly completed. The IRS processed it without any issues - no penalties, no follow-up correspondence, nothing. It was honestly much less dramatic than I had anticipated. The key thing to understand is that Form 966 is primarily informational - it notifies the IRS of your dissolution plan, but the real tax substance is captured in your final 1120-S. Since you've already filed that correctly and properly distributed all assets, you've handled the most important compliance requirements. The IRS seems to recognize this distinction and doesn't waste enforcement resources on small S-corps for late informational filings when there's clearly no tax avoidance involved. My recommendation: Go ahead and file the Form 966 now with a brief, professional explanation letter. Keep it simple - acknowledge the late filing was an oversight, confirm that your final returns were properly filed and all tax obligations met. Most importantly, make sure the asset values and distribution dates on Form 966 match exactly what you reported on your final 1120-S to avoid any inconsistencies that might raise questions. Based on my experience and what I've seen with others in similar situations, you're going to be fine. The IRS has much bigger compliance issues to focus on than late paperwork from small businesses that clearly made good faith efforts to handle their dissolution properly.

I'm dealing with this exact same situation! Dissolved my S-corp about 7 months ago, filed the final 1120-S properly, but completely forgot about Form 966 until I was going through old files this week. Reading through everyone's experiences here has been such a relief - it's incredible how many people went through the same thing with consistently positive outcomes. The pattern is really clear: as long as you've handled the substantive tax requirements (final 1120-S, proper distributions, taxes paid), the IRS treats late Form 966 as a minor paperwork oversight rather than a serious compliance violation. What gives me the most confidence is seeing multiple people who were 8-12 months late and experienced zero penalties. It really seems like the IRS focuses their enforcement efforts on actual tax avoidance rather than late informational returns from small businesses that clearly made good faith efforts to comply. I'm going to follow the same approach that worked for everyone else - file the Form 966 this week with a simple explanation letter acknowledging the oversight and confirming all final obligations were met. I'll also double-check that asset values match between the 966 and my final 1120-S like others recommended. Thanks to everyone who shared their real experiences instead of just generic warnings - this thread has been incredibly helpful for reducing the stress around what turned out to be a much more common and manageable situation than I initially thought!

I'm in a nearly identical situation - dissolved my S-corp about 6 months ago and just discovered I never filed Form 966! This thread has been absolutely invaluable. Reading through everyone's experiences, the pattern is crystal clear: the IRS doesn't penalize small S-corps for late Form 966 filings when you've properly handled the substantive requirements. Like many of you, I filed my final 1120-S correctly and distributed all assets properly. What's really reassuring is seeing so many people who were 6-12 months late with zero penalties or issues. It definitely seems like the IRS recognizes the distinction between actual tax compliance (which we've all handled) and paperwork formalities. I'm going to follow the proven approach everyone's shared - file the Form 966 this week with a brief explanation letter acknowledging the oversight and confirming all final obligations were met. I'll also carefully verify that asset values and dates match exactly between the 966 and my final 1120-S to avoid any discrepancies. Thanks to everyone who shared their real-world outcomes instead of just theoretical warnings. This thread has transformed what felt like a major problem into a manageable administrative task. Sometimes we really do overthink these situations when the IRS clearly has bigger priorities than chasing down late informational returns from compliant small businesses!