Interest and Penalties — 2025 Inst 1120-F (PDF)

Interest. Interest is charged on taxes paid late even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction understatements from the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section 6621.

Penalty for late filing of return. A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a tax return required to be filed in 2026 that is more than 60 days late is the smaller of the tax due or $525. The penalty will not be imposed if the corporation can show that the failure to file on time was due to reasonable cause.

Caution: If you believe that reasonable cause exists, do not attach an explanation when you file Form 1120-F. Instead, if the corporation receives a penalty notice after the return is filed, send an explanation to the IRS at that time and the IRS will determine if the corporation meets reasonable-cause criteria.

Penalty for late payment of tax. A corporation that does not pay the tax when due may generally be penalized ¹ /2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. The penalty will not

Form 944, Employer’s ANNUAL Federal Tax Return; or
Form 945, Annual Return of Withheld Federal Income Tax. The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the full amount of the unpaid trust fund tax. See the Instructions for Form 720 or Pub. 15 (Circular E), Employer’s Tax Guide.

Other penalties. Other penalties may be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. See sections 6662, 6662A, and 6663.