S-Corp tax return processed before mailed extension - just got CP162A penalty notice!

This is unfortunately a common timing issue with S-Corps. When you e-file the return before the paper extension is processed, the IRS system automatically assumes you've filed late and generates the CP162A. Here's what you should do: Call the IRS Business Tax line (which yes, is a nightmare wait time) and explain that you mailed the extension before the deadline. Keep proof of mailing the extension - a certified mail receipt is best, but even a regular postmark can work. The IRS generally follows the "timely mailed, timely filed" rule. You have two options - pay the penalty now and file for an abatement/refund later, or request an abatement immediately. I usually recommend paying to stop further interest accumulation, then filing Form 843 (Claim for Refund) with proof of your timely extension filing. Don't worry too much - this happens fairly often and the IRS will typically remove the penalty once they confirm your extension was filed on time.

After a similar nightmare with penalty notices for my LLC (different structure but same concept), I found https://taxr.ai super helpful. I uploaded my CP162A notice and it immediately identified this as a common "crossed in the mail" situation where the e-filed return beat the paper extension to processing. The tool explained exactly what to look for in my records to prove timely filing of the extension and even helped me draft a proper abatement request that cited the correct IRS rules. Saved me hours of research and stress figuring out how to handle it properly. The best part was that it analyzed the specific language in my notice and pointed out that this was actually an automated penalty that's routinely abated when you provide evidence of timely extension filing.

Okay I need to follow up about my skeptical comment yesterday. After getting ANOTHER notice from the IRS this morning about a completely different issue, I was desperate enough to try https://taxr.ai and wow... seriously impressed. I uploaded both notices (the one from today and one from last month) and it immediately broke down what each one meant, the deadlines I needed to worry about, and the exact documentation I needed to gather. What really blew my mind was that it caught something I would have missed - the second notice was actually related to the first one, just worded completely differently. Would have wasted so much time figuring that out on my own. For anyone hesitant like I was, it's worth checking out. Saved me hours of stress and confusion.

If you need to actually talk to someone at the IRS about this (which you probably will), use https://claimyr.com to avoid the ridiculous hold times. I was in the exact same boat last year with an S-Corp extension that apparently didn't get processed before the return. I spent THREE days trying to get through the IRS business line with no luck. Then I found Claimyr through a YouTube video (https://youtu.be/_kiP6q8DX5c) showing how it works. They basically wait on hold with the IRS for you, then call you when an agent picks up. Got connected to an IRS agent in about 2 hours (while I just went about my day), explained the situation, and they put a hold on the penalty while they researched whether my extension was received. Saved me from having to pay and then fight for a refund.

I need to publicly apologize for my skeptical comment about Claimyr. After getting transferred between THREE different IRS departments yesterday and disconnected twice, I was desperate enough to try it. The process was exactly as described - I entered my phone number, they called me to confirm what department I needed, and then I just went back to work. About 90 minutes later, my phone rang and boom - I was talking to an actual IRS agent. The agent was able to look up our S-Corp extension filing and confirmed it was received timely. They're sending me documentation to request penalty abatement. Without this service I'd still be on hold or would have given up entirely. Sometimes being wrong feels pretty good!

Make sure you keep ALL documentation related to mailing that extension! I went through something similar in 2022, and what saved me was having the certified mail receipt showing I mailed it before the deadline. The IRS initially rejected my abatement request, but when I appealed and included the certified mail receipt, they reversed the penalty. They told me their systems sometimes don't "talk" to each other properly when paper documents and electronic returns are processed out of order. Also, document every phone call - get badge numbers of representatives you speak with and specific case numbers. This documentation trail is crucial.

Does anyone know if the penalty amount they assess is calculated on the full tax liability or just on whatever would have been due with the extension? Our S-Corp doesn't owe any tax (pass-through entity), so I'm not sure why we'd get penalized for filing the RETURN late if no payment was due.

I just went through this exact same situation with my S-Corp last month! The timing mismatch between paper extensions and e-filed returns is such a common issue, but it's incredibly stressful when you're dealing with it. Here's what worked for me: I called the IRS business line (yes, the wait was brutal - about 2.5 hours), but once I got through, the representative was actually very helpful. I explained that I mailed the extension on March 15th but e-filed the return later, and she was able to look up their records to confirm they had received the extension. She put an immediate hold on the penalty while they processed the abatement request. The key thing she told me was to have any proof of mailing ready - even though I didn't use certified mail, I had the envelope and could provide the exact date I mailed it. Don't panic about paying it by May 13th if you can't get through to them in time. You can always pay it and then file for a refund once they process your abatement request. The important thing is that you did file the extension on time, which should be verifiable in their system. Good luck with the call - it's worth the wait time to get this resolved properly!