Quick Answer Box:
When an LLC, S-Corp, or partnership fails to file taxes, the IRS can assess steep penalties — $210 per shareholder/partner per month (up to 12 months), loss of pass-through status, and additional interest charges. Unfiled business returns also increase audit risk and can dissolve liability protection if left unresolved.

Why Business Tax Returns Carry Higher Stakes

Unlike individual returns, business tax filings affect multiple people — partners, shareholders, and employees. That means the IRS views unfiled business returns as more serious, since it impacts tax collection on several fronts.

For example:

  • An S-Corp return (Form 1120-S) must report profits that flow through to shareholders’ 1040s.

  • A partnership return (Form 1065) passes K-1 forms to partners, reporting each share of income.

  • An LLC taxed as either of the above has the same obligations.

When those filings don’t happen, it disrupts the IRS’s ability to collect from everyone down the line.

IRS Penalties for Businesses That Don’t File

The IRS imposes stiff penalties on business entities that fail to file:

  • Partnerships & S-Corps: $210 per partner/shareholder per month, up to 12 months.

  • C-Corporations: 5% of unpaid tax per month (up to 25%), plus interest.

  • Loss of S-Corp Status: Failure to file can jeopardize pass-through taxation, forcing the IRS to treat the business as a C-Corp.

  • Additional State Penalties: States like NC add their own fines, compounding the problem.

Other Consequences Beyond Penalties

It’s not just about fines. Unfiled business tax returns can:

  • Block financing opportunities – lenders require compliant returns.

  • Trigger audits for owners – IRS often audits personal returns connected to delinquent businesses.

  • Jeopardize liability protection – if an LLC doesn’t follow compliance rules, courts can pierce the corporate veil.

  • Destroy investor confidence – partners and shareholders may walk away if filings aren’t up to date.

Steps to Fix Unfiled Business Returns

  1. Gather Records: Pull bank statements, invoices, receipts, payroll, and prior-year returns.

  2. Rebuild Financials: Accurate bookkeeping is essential — reconstruct income & expenses.

  3. File Delinquent Returns: Even late, it’s better to file than let the IRS estimate.

  4. Negotiate Penalties: Request penalty abatement where reasonable.

  5. Create Ongoing Compliance Systems: Monthly bookkeeping and quarterly check-ins prevent future issues.

Why Work With a Professional

Business filings are too complex to DIY when you’re behind. At Polaris Tax & Accounting, we:

  • Reconstruct bookkeeping for missing years.

  • Prepare and file past-due 1065s, 1120s, or 1120-S returns.

  • Coordinate owner/shareholder personal filings to ensure alignment.

  • Negotiate with the IRS for penalty relief and payment plans.

Get Back in Control Today

The longer you wait, the worse the penalties become. Whether you’re a single-member LLC or a multi-partner business, getting compliant protects your company, your assets, and your future.

👉 Learn more about resolving unfiled business returns here.

Or schedule a confidential consultation with Polaris Tax & Accounting today.