Form 1120, U.S. Corporation Income Tax Return, is due on the 15th day of the fourth month after the end of a C‑corporation’s tax year (April 15 for calendar‑year corporations). Missing this filing deadline can trigger a cascade of penalties and interest charges that erode profits and invite unwanted IRS scrutiny. Below is a detailed breakdown of the repercussions for filing Form 1120 late in 2025, how each charge is calculated, and the steps corporations can take to mitigate or avoid them.
📅 Key Filing and Payment Deadlines for 2025
- Original due date: April 15, 2025 (calendar‑year C‑corps)
- Extension deadline: October 15, 2025 (Form 7004 grants a six‑month filing extension—but no payment extension)
- Estimated tax deposits: Four quarterly installments (April 15, June 15, September 15, and December 15 for calendar‑year filers)
If Form 1120 is filed after the due date (including extensions), the IRS assesses an FTF penalty calculated as:
- 5 % of the unpaid tax for each month—or part of a month—the return is late
- Capped at 25 % of the unpaid tax
- Minimum penalty when the return is over 60 days late: the lesser of $510 (for 2025) or 100 % of the tax due
Example 1 – FTF Only
A corporation owes $40,000 and files 3 months late with no extension:
$40,000 × 5 % × 3 months = $6,000 failure‑to‑file penalty
💰 Failure‑to‑Pay (FTP) Penalty
If the corporation fails to pay its income tax by the original deadline—even if it files on time—an FTP penalty applies:
- 0.5 % of the unpaid tax for each month or part of a month the tax remains unpaid
- Capped at 25 % of the unpaid tax
- Reduced to 0.25 % per month while an approved installment agreement is in effect
Example 2 – FTF and FTP Combined
Same corporation, now both filing and paying 3 months late:
FTF = $40,000 × 5 % × 3 = $6,000 FTP = $40,000 × 0.5 % × 3 = $600 Combined (FTF is reduced by FTP during overlap) = $6,000 + $600 – ($40,000 × 0.5 % × 3) = $6,000 Total penalties = $6,600
📈 Interest on Unpaid Tax and Penalties
Interest accrues on both unpaid tax and assessed penalties from the original due date until full payment. The rate is the federal short‑term rate plus 3 %, compounded daily and adjusted quarterly. Unlike many penalties, interest cannot be abated.
🏦 Failure‑to‑Deposit (FTD) Penalty on Estimated Taxes
C‑corporations must prepay annual tax through timely quarterly deposits. Missing or underpaying deposits triggers the FTD penalty, ranging from 2 % to 15 %, depending on how late the payment is:
- 1–5 days late → 2 % penalty
- 6–15 days late → 5 %
- 16+ days late (but before 10 days after IRS notice) → 10 %
- More than 10 days after IRS notice → 15 %
🛡️ Reasonable‑Cause Relief and First‑Time Abatement
The IRS may waive FTF and FTP penalties if the corporation proves that lateness was due to reasonable cause and not willful neglect—e.g., natural disasters, serious illness of key personnel, or erroneous professional advice. First‑time abatement (FTA) is also available if:
- The corporation had no penalties for the preceding 3 tax years
- All required returns are filed (or an extension is in place)
- Any tax currently due is paid or a payment agreement is active
✅ Strategies to Avoid or Minimize Penalties
- File Form 7004 timely to secure a six‑month filing extension.
- Remit at least 100 % of prior‑year tax (or 90 % of current‑year liability) via estimated deposits to avoid FTP and FTD charges.
- Monitor quarterly income and adjust estimates proactively.
- Automate reminders for key filing and payment dates.
- Document any extraordinary events as evidence for reasonable‑cause requests.
🔚 Conclusion
Late filing or late payment on Form 1120 can expose corporations to a web of penalties and compounding interest. Understanding how the Failure‑to‑File, Failure‑to‑Pay, and Failure‑to‑Deposit penalties are calculated—and knowing the relief provisions—empowers corporate officers to take preventive action or seek abatements where justified. Filing on time, paying as much as possible by the original deadline, and maintaining meticulous records remain the best defenses against costly IRS assessments.
