You missed the business tax deadline. What now?
File as soon as you can, because penalties grow monthly. Partnerships and S-Corps pay a penalty per owner, per month, even with no tax due. C-Corps and sole proprietors pay 5% of unpaid tax a month, up to 25%. You may qualify for relief if you have a clean history.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- Pass-throughs. Per owner, per month, up to 12 months
- Tax owed. 5% of unpaid tax a month, up to 25%
- Late payment. 0.5% of unpaid tax a month, plus interest
What are the penalties?
| Return | Late filing penalty |
|---|---|
| Form 1065 or 1120-S | Set amount per owner, per month, up to 12 months |
| Form 1120 | 5% of unpaid tax a month, up to 25%, with a minimum |
| Schedule C with Form 1040 | 5% of unpaid tax a month, up to 25%, with a minimum |
Late payment is separate, at 0.5% of unpaid tax a month, plus interest on what you owe. When both apply in a month, the filing penalty is reduced by the payment penalty.
The filing penalty is usually ten times the payment penalty. So if you can't pay in full, file anyway. It's the single most useful thing to know here.
What should you do first?
- Get your books into shape. Catch up if you need to.
- File the return, even if you can't pay it all.
- Send K-1s to any owners right away.
- Pay what you can today, since interest runs daily.
- Set up a payment plan for the rest if you need to.
Can you get penalties removed?
Often, yes. First-time relief may apply if you've filed and paid on time for the prior three years and you've got no other penalties. Reasonable cause covers serious events like a fire, a death or a serious illness. "My bookkeeper was late" usually doesn't work. Some small partnerships can qualify for separate relief too.
Ask after the notice arrives, or include a statement with the return. We can read the notice and prepare the response for you to sign.
What if it's been years?
File the most recent years first if you're working with limited time, and go back from there. The IRS generally expects the last six years for compliance, but it can ask for more. State returns matter too, since states may dissolve or suspend a business that stops filing. Here's how to get back on track.
How do you avoid this next year?
Mark March 15 and April 15 now. File an extension by default if your books aren't ready. It's free and it takes away the biggest penalty. Then keep your books current, so the return's a short job in February.
Sources
General information, not tax advice for your situation.
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See our business tax returns serviceIs there a penalty for filing a late return if I owe no tax?
For Form 1065 and 1120-S, yes. For Schedule C and Form 1120, the penalty is usually based on tax owed, so it may be small or zero.
How do I ask for first-time penalty relief?
Call the number on your notice or send a written request. You'll need a clean three-year history.
Should I file late if I can't pay?
Yes. Filing stops the larger penalty, and you can set up a payment plan for the balance.
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