The IRS is penalizing the late filing of S corporation and partnership tax returns. This is despite the fact that late filing of the tax returns (Forms 1120S and 1065), due March 15th, often does not affect the receipt of taxes due on April 15th. Those receiving this penalty are often couples and other small firms that have formed these business entities to provide legal protection for their shareholders.

How much is the IRS penalty?

The penalty is calculated for each partial month the return is late, multiplied by the number of shareholders or partners. The fine is $245 per shareholder or partner per month in 2025. So, a return filed 17 days late with no tax due could cost a married couple with an S corporation $980 in penalties.

The late filing of S corporation and partnership returns

If you have an S corporation or other partnership, either file an extension or submit your tax return on time. Remember, an extension gives you six months to file. You do not owe the tax until the flow-through tax return due date, which is typically April 15th.

If you receive a penalty, challenge it. A well-worded request for reversal of the late filing penalty may be successful. Remember, the Treasury Department is still receiving taxes owed to it on time. Contact our RRBB advisors if you have any questions.