IRS Form 1120S & Late Filing Penalties

Late Filing Penalties With Form 1120S

Tax Form 1120S is the form used to report the income from an S corporation. An S corporation is a conduit for income, losses and credits, which it distributes to the owners in accordance with their proportional ownership. Some business owners use it strictly to limit personal liability, while others find it a useful tool to lower FICA and other taxes.

Time Frame

The date for S corporations to file Form 1120S is the 15th day of the third month after the end of their tax year. This is March 15th of the filing year for many S corporations, since they use the calendar year as their tax year.


S corporations that find it impossible to meet the deadline can file Form 7004 for an automatic extension of time. This gives the S corporation an additional six months to file its return. Since S corporations pay no taxes and the profits pass to the owners, there's never tax due or an estimate to pay.

Late Filing Penalties

In the case of the S corporation, since there is normally no tax due, the IRS places a late filing penalty on the S corporation in the amount of $195 for every month or part of a month after the corporation should have filed until the actual receipt of the form by the IRS. The IRS then multiplies this penalty times the number of shareholders in the corporation in any part of the tax year. If there were tax due, the penalty still would be enforced, in addition to the penalty on the late tax due.

BIG, LIFO and Excess Net Passive Income

These are the only income tax items the S corporation has to pay. All three items originate if the S corporation was previously a C corporation and changed. BIG stands for built-in gains. It occurs when the S corporation sells appreciated property purchased when it was a C corporation. LIFO stands for last-in-first-out and it deals also with a change of accounting method when the C corporation switched to an S. Excess net passive income requires that the corporation have more than 25 percent of its income from passive sources, that it has switched from a C corporation to an S corporation and that when it did, it retained some of that profit. This type of income must be shown and paid by the S corporation.

Late Payment Penalties

The maximum amount of penalty on unpaid tax is 25 percent. The IRS charges 5 percent for every month the tax remains unpaid. If you owed tax, and did not file in a timely fashion, this amount is in addition to late filing penalty.