What are the consequences of filing Form 1120S late for S corporations?

Thanks for the info. Follow up question - does the IRS ever waive these penalties for S corps? My accountant told me they sometimes do for individuals if you have a good reason or it's your first time filing late.

The IRS can potentially waive the penalty if you can demonstrate "reasonable cause" for filing late, not just willful neglect. This is handled case-by-case but could include situations like natural disasters, death/serious illness of the taxpayer or immediate family, unavoidable absence, or destruction of records. For first-time penalty abatement, the rules are a bit different for businesses than individuals. The IRS may consider first-time abatement if the S corporation has a clean compliance history for the past 3 years. But don't count on this - it's better to file on time or file for an extension if needed.

Did you actually use this for an 1120S specifically? I'm curious if it handles business returns or if it's more for personal tax stuff. Our S-Corp has 4 shareholders so late penalties add up crazy fast.

I'm a bit skeptical about online tools handling complex business tax issues. How exactly did it help with the "reasonable cause" argument? Doesn't the IRS require pretty specific documentation for that?

Yes, I used it specifically for our 1120S issue. It has a section dedicated to business returns including S corporations. It was particularly helpful with calculating the exact penalty exposure based on our 4 shareholders and exactly how many months we were late. The reasonable cause functionality was impressive - it didn't just generate generic language. It asked detailed questions about why we missed the deadline, then created documentation that addressed the specific regulatory requirements for penalty relief. It even highlighted relevant precedent cases where the IRS had granted relief in similar situations. The tool also organized all our supporting evidence in the format the IRS expects, which made a huge difference.

Wait how does this actually work? I thought it was impossible to get through to the IRS these days. Is this some kind of paid priority line?

This sounds made up honestly. Nobody gets through to the IRS that quickly. I've been calling for weeks about our S-Corp penalty notice. Either you're extremely lucky or this is some kind of scam.

It's definitely not a priority line. From what I understand, they use automated technology to navigate the IRS phone tree and wait on hold for you. When they reach a human agent, they call you and connect you directly to that person. It literally saved me hours of hold time. No luck involved - it's just a smart solution to a frustrating problem. The service bypasses the waiting game by handling the hold time for you. When I used it, I got a text when they had an agent on the line, then I just picked up the phone and was instantly connected. Completely changed my perspective on dealing with the IRS for our business issues.

Does Drake software make it easy to file the extension? I'm still learning the system and don't want to miss anything important.

Yes, Drake makes it super simple to file Form 7004 extensions. You'll find it under the "Extensions" menu in the software. You just need basic info like the company name, EIN, and a reasonable estimate of the total tax liability (though S-Corps typically don't have entity-level tax). Drake can e-file the extension for you too, which is much better than mailing it. You'll get confirmation when it's accepted. Just remember that while the extension gives you until September 15 to file, any tax owed by shareholders based on S-Corp income still needs to be paid by the original March deadline to avoid their own penalties and interest.

It's definitely harsh but unfortunately very real. The per-shareholder per-month structure really hurts multi-owner businesses. I recommend setting calendar reminders 2 months before deadlines. Even better, get everything to your accountant super early.

Thanks for the tip. I'll definitely tell him to set up some reminders for next year. I still think the penalties are way out of proportion especially for small businesses just trying to stay afloat. The government makes it so hard to run a business sometimes!

This is really helpful advice, especially about the first-time penalty abatement option. I had no idea that was available for S-Corps with clean filing histories. Quick question - when you say "clean filing history for the past 3 years," does that mean they need to have filed on time every year, or just that they filed eventually without any major compliance issues? My client's situation with the previous accountant filing late but eventually getting things submitted makes me wonder if they'd still qualify.

Great question! For first-time penalty abatement, the IRS typically looks at whether you've been assessed penalties (not just whether you filed on time). If your client's previous accountant did eventually file and there were no penalties assessed for those late filings, they might still qualify. The key factors the IRS considers for "clean compliance history" are: - No penalties assessed in the prior 3 tax years - All required returns filed (even if late, as long as no penalties were charged) - All taxes paid (or payment arrangements made) Since you mentioned the previous accountant told them "nothing was owed," it's possible no penalties were actually assessed if the IRS accepted reasonable cause arguments or if the filings weren't that late. I'd recommend pulling transcripts for the past 3 years to see exactly what's on record with the IRS before making the abatement request. Even if they don't qualify for first-time abatement, reasonable cause based on reliance on a tax professional who failed to meet deadlines can still be a valid argument for penalty relief.