To get an S-corporation late filing penalty removed, you send the IRS a written request under one of two programs: the First-Time Abate administrative waiver if the corporation has a clean three-year filing history, or a reasonable cause request if something outside your control prevented timely filing. Below you’ll find a sample S-corp late filing penalty abatement letter for each path, plus what to include, what to leave out, and how to submit it.
Pick the right path before you start drafting. The two letters look different because they’re answering different questions, and sending the wrong one wastes weeks.
Which Letter You Should Write
First-Time Abate is the easier route and should be your first choice when available. The IRS will waive the penalty if the corporation filed Form 1120-S on time for the three tax years before the penalty year, had no penalties during that window, and is current on all required filings (or has an active payment arrangement for any balance due).1Internal Revenue Service. Administrative Penalty Relief You don’t need to explain why the return was late. You just have to qualify.
If the corporation had a penalty in any of the prior three years, First-Time Abate is unavailable and you’ll need to argue reasonable cause. The standard the IRS applies is whether the business exercised ordinary care and prudence but still could not file on time because of circumstances outside its control.2Internal Revenue Service. Internal Revenue Manual 20.1.1.3.2 Reasonable Cause Situations that regularly qualify include:
- Fires, natural disasters, or other casualties that destroyed records or blocked access to the business
- Serious illness or death of the person responsible for filing, a shareholder, or an immediate family member
- Unavoidable absence of the individual who normally handles tax compliance
You’ll also need to show the return was filed as soon as the obstacle was resolved. Supporting documentation — medical records, fire department reports, insurance claims, death certificates — matters here in a way it doesn’t for First-Time Abate.
Have your CP162 notice in front of you before you draft. It contains the penalty amount, notice number, notice date, and IRS mailing address you’ll need throughout the letter.3Internal Revenue Service. Understanding Your CP162 Notice
Sample First-Time Abate Letter
Replace the bracketed items with your information.
[Corporation Name]
[Street Address]
[City, State ZIP]
EIN: [XX-XXXXXXX]
[Date]
Internal Revenue Service
[Address from CP162 Notice]
Re: Request for First-Time Penalty Abatement
Form 1120-S, Tax Year Ending [December 31, 20XX]
CP162 Notice Number: [XXXXXXXXX]
Penalty Amount: $[X,XXX.XX]
To Whom It May Concern:
[Corporation Name], EIN [XX-XXXXXXX], respectfully requests abatement of the $[X,XXX.XX] late filing penalty assessed for the tax year ending [December 31, 20XX], as shown on CP162 notice [number], dated [notice date].
We are requesting relief under the IRS First-Time Abate administrative waiver. [Corporation Name] filed Form 1120-S for the [20XX], [20XX], and [20XX] tax years on time and had no penalties assessed during any of those years. All required tax filings are current and all balances are paid in full.
We respectfully ask that the penalty of $[X,XXX.XX] and any associated interest be removed from the account. Please send written confirmation of your determination to the address above.
Sincerely,
[Name]
[Title — President, Treasurer, or other authorized officer]
[Phone Number]
Keep it short. First-Time Abate is a mechanical test: clean three-year history, current filings, no outstanding balances. Adding paragraphs about why you filed late actually hurts the request because it shifts the agent toward evaluating your excuse rather than checking your record.
Sample Reasonable Cause Letter
Use this template when First-Time Abate is unavailable and you need to explain what prevented timely filing. The narrative is where the case is won or lost.
[Corporation Name]
[Street Address]
[City, State ZIP]
EIN: [XX-XXXXXXX]
[Date]
Internal Revenue Service
[Address from CP162 Notice]
Re: Request for Penalty Abatement Due to Reasonable Cause
Form 1120-S, Tax Year Ending [December 31, 20XX]
CP162 Notice Number: [XXXXXXXXX]
Penalty Amount: $[X,XXX.XX]
To Whom It May Concern:
[Corporation Name], EIN [XX-XXXXXXX], requests abatement of the $[X,XXX.XX] late filing penalty assessed for the tax year ending [December 31, 20XX], as shown on CP162 notice [number], dated [notice date]. We believe the late filing was due to reasonable cause, and the corporation exercised ordinary business care and prudence in attempting to meet its obligations.
[Describe the specific event. For example: “On [date], [Name], the corporation’s sole officer and the person responsible for all tax filings, was hospitalized for [condition] and remained unable to manage business affairs until [date]. During this period, no other individual had authorization or access to the corporation’s financial records.”]
[Describe what the corporation did once the obstacle was resolved. For example: “Upon [Name]’s recovery, the corporation immediately engaged [CPA/tax preparer] to compile the return. Form 1120-S was filed on [date], which was [X] days after [Name] was able to resume business operations.”]
Supporting documentation is enclosed:
- [e.g., Physician’s letter confirming hospitalization and dates of incapacity]
- [e.g., Hospital discharge records]
- [e.g., Proof of filing date for the completed return]
We respectfully request that the penalty of $[X,XXX.XX] and any associated interest be removed from the account. Please send written confirmation of your determination to the address above.
Sincerely,
[Name]
[Title — President, Treasurer, or other authorized officer]
[Phone Number]
Enclosures: [list each document]
A few things that tend to separate successful reasonable cause letters from denied ones. Be specific about dates and names rather than vague about hardship. Show that the gap between the obstacle ending and the return being filed was as short as you could make it. Avoid emotional language. The agent reviewing the letter is checking whether your facts match the standards in the Internal Revenue Manual, not weighing how sympathetic your story sounds.
Arguments That Won’t Work
Two arguments show up constantly in S-corp abatement requests and almost always fail.
The first is blaming your accountant. The IRS position is that you’re responsible for meeting filing deadlines even when someone else prepares your return, and reliance on a tax professional generally does not establish reasonable cause.4Internal Revenue Service. Penalty Relief for Reasonable Cause If your preparer truly caused the delay, your recourse is against the preparer.
The second is assuming your small S-corp gets an automatic pass. Partnerships with 10 or fewer partners can qualify for automatic relief under Revenue Procedure 84-35. That rule does not apply to S-corporations.5Internal Revenue Service. Understanding Your CP162B Notice Even a single-shareholder S-corp has to go through the standard abatement process.
How to Send the Letter
You have three options.
By phone, for First-Time Abate only. The fastest route is calling the toll-free number printed on the CP162 notice. Some First-Time Abate requests can be resolved on the call.6Internal Revenue Service. Penalty Relief Have the notice, the penalty amount, and your three-year filing history in front of you before you dial. An authorized officer of the corporation needs to make the call, or a tax professional with a valid Form 2848 power of attorney on file.7Internal Revenue Service. About Form 2848, Power of Attorney and Declaration of Representative If the agent approves on the spot, write down the date, the agent’s ID number, and what they said. You’ll want that record if the abatement doesn’t appear on the next notice.
By mail. Send the letter to the IRS address printed on the CP162 notice.8Internal Revenue Service. Understanding Your CP162A Notice Use certified mail with return receipt requested so you have proof of delivery. Keep the tracking receipt, a copy of the signed letter, and copies of every enclosure in your permanent tax records.
Using Form 843. Form 843 is the IRS’s official form for requesting penalty abatement or refund.9Internal Revenue Service. About Form 843, Claim for Refund and Request for Abatement You aren’t required to use it for an S-corp late filing penalty — a well-structured letter works — but it’s particularly useful if you already paid the penalty and want a refund. You can attach the same narrative and supporting documents you’d send with a letter. File it at the address in the form’s instructions.10Internal Revenue Service. Where to File for Form 843
After You Send It
The IRS typically responds within 30 to 60 days, though complex cases or busy periods stretch longer. You may get an interim notice acknowledging the request is under review, or a follow-up asking for more documentation.
If the penalty is removed, you’ll receive a notice showing a zero balance. The IRS automatically removes or reduces interest that accrued on the penalty when the underlying penalty is abated, so no separate interest request is needed.6Internal Revenue Service. Penalty Relief If you already paid the penalty, file Form 843 to claim a refund. You generally must file within three years of the original return filing date or two years of the payment date, whichever is later.11Internal Revenue Service. Time You Can Claim a Credit or Refund
If the request is denied, the IRS will send a denial letter explaining its reasoning and your appeal rights.12Internal Revenue Service. Penalty Appeal You can request a conference with the IRS Independent Office of Appeals, which takes a fresh look at the case. Read the denial reasoning carefully first. A First-Time Abate denial sometimes comes from a prior-year penalty or missing filing you didn’t know about, and correcting that underlying issue can be more productive than appealing. For reasonable cause denials, Appeals lets you present additional evidence or make arguments the original examiner may not have considered.13Internal Revenue Service. Notice 1215 – What to Do if You Disagree With the Penalty
One last thing worth flagging: federal abatement doesn’t touch any state-level late filing penalty your S-corporation may owe. Many states impose their own penalties, and each has its own process for requesting relief. Most don’t offer a federal-style First-Time Abate program. Check with your state tax agency separately.