If your business is taxed as an S-Corporation, filing your tax return on time is extremely important. For tax returns due in 2026 (for the 2025 tax year), the IRS has increased the late filing penalty, and it can add up quickly.
Many business owners don’t realize that penalties apply even if your S-Corp does not owe any tax. Understanding the rules now can help you avoid unnecessary IRS penalties later.
What Is the S-Corp Late Filing Penalty?
The IRS charges a late filing penalty under IRC §6699 when an S-Corporation files Form 1120-S after the deadline.
- $260 per shareholder, per month (or part of a month)
- Maximum penalty applies for up to 12 months
- Applies even if your S-Corp owes no tax
S-Corporations with multiple shareholders can face significant penalties if they file late.
Important S-Corp Filing Deadlines for 2026
For the 2025 tax year, S-Corp deadlines are:
- March 15, 2026 – Original filing deadline
- September 15, 2026 – Extended deadline (if an extension is filed)
Missing either deadline can trigger penalties. Even one day late counts as a full month for IRS penalty purposes.
How the IRS Calculates the Penalty
The IRS uses a simple formula:
$260 × Number of Shareholders × Number of Months Late
Example
If an S-Corp has 3 shareholders and files its return 4 months late:
$260 × 3 × 4 = $3,120 penalty
The longer the delay, the higher the penalty—up to the 12-month maximum.
Why You Owe a Penalty Even If No Tax Is Due
Many S-Corp owners assume they won’t be penalized if their business didn’t owe taxes. This is a common mistake.
The IRS still requires S-Corporations to:
- File Form 1120-S on time
- Issue Schedule K-1s to shareholders
- Report income or losses accurately
Because of this, late filing penalties apply even if your business shows a loss or owes zero tax.
What Changed for 2026?
The $260 per shareholder penalty reflects an IRS inflation adjustment. In previous years, the penalty amount was lower.
This increase means:
- Penalties grow faster
- Late filings are more expensive
- Compliance is more important than ever
Can the IRS Remove or Reduce the Penalty?
In some cases, the IRS may reduce or remove penalties if you can prove reasonable cause, such as:
- Natural disasters
- Serious illness or death
- IRS processing or system errors
Penalty relief is not automatic and must be requested with proper documentation.
How to Avoid S-Corp Late Filing Penalties
S-Corp owners can reduce risk by:
- Tracking filing deadlines early
- Filing an extension before March 15
- Keeping accurate and organized books
- Working with a CPA for S-Corporation tax rules
- Preparing shareholder information ahead of time
How Saluja & Associates- CPA Firm in Houston Can Help
At Saluja & Associates CPA, we help S-Corporation owners stay compliant, avoid IRS penalties, and file with confidence.
- Timely tax preparation and filing of Form 1120-S
- Accurate Schedule K-1 preparation
- Proactive tax planning for shareholders
- IRS penalty prevention and support
Don’t risk costly late filing penalties.
Let our experienced CPA team ensure your S-Corp tax return filing in Houston is filed correctly, on time, and with peace of mind.
For S-Corporation tax returns required to be filed in 2026 (for the 2025 tax year), the IRS late filing penalty is $260 per shareholder, per month (or part of a month). The penalty can be charged for up to 12 months, which means it can add up quickly for businesses with multiple shareholders.
Yes. The late filing penalty applies even if your S-Corp owes no tax or had a loss. The IRS requires S-Corps to file Form 1120-S and provide Schedule K-1s to shareholders on time, regardless of income or tax due.
The IRS can charge the S-Corp late filing penalty for up to 12 months. Even filing late by one day counts as a full month for penalty purposes, which is why timely filing or filing an extension is so important.
Yes, in some cases. A CPA can help request penalty relief if your S-Corp qualifies for reasonable cause, such as serious illness, natural disasters, or IRS errors. A CPA can also ensure the request is prepared correctly and supported with proper documentation.
If you miss both deadlines, your S-Corp will continue to accrue penalties each month, up to the 12-month maximum. The IRS may also send penalty notices, and shareholders could face delays or issues when filing their personal tax returns due to late Schedule K-1s.
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