Form 1120-S (S-Corp) COVID Penalty Refund

S-corps with Form 1120-S penalties (especially the per-shareholder late-filing penalty under §6699) assessed during Jan 20, 2020 – July 10, 2023 may be eligible for refunds under Kwong. File Form 843 by July 10, 2026. Refund eligibility is not guaranteed; Kwong is being appealed.

Who qualifies

S-corporations charged the §6699 late-filing penalty (typically $245 per shareholder per month, capped at 12 months as of 2025) on Form 1120-S during the COVID-19 disaster window may qualify. The penalty stacks with the number of shareholders, so even a modest S-corp can accumulate substantial penalty exposure. The Kwong reasoning — that deadlines were automatically suspended during the disaster — may invalidate those assessments.

  • S-corp account transcript shows a §6699 late-filing penalty assessment dated between Jan 20, 2020 and July 10, 2023.
  • The Form 1120-S was due (typically March 15 of each tax year) within the disaster window.
  • The penalty was assessed regardless of whether you eventually paid it — both refund and abatement claims qualify.

How much could I get back?

Because the §6699 penalty stacks per shareholder per month, refunds can scale quickly: a 5-shareholder S-corp 12 months late could see thousands of dollars per assessed year. Multiple late years compound the opportunity. Refund eligibility and amounts cannot be guaranteed.

Why this specifically

S-corp shareholders often discovered late-filing penalties only when the assessed bill arrived — and many paid without challenge. Kwong creates a structured basis to revisit those payments. The per-shareholder structure of the §6699 penalty means even small S-corps can have non-trivial recoverable amounts.

FAQ

Does the S-corp file the claim, or do shareholders?

The S-corp itself files Form 843 — the §6699 penalty is assessed against the entity, not the individual shareholders. PenaltyBack prepares the entity-level filing.

What if our S-corp has dissolved since the penalty was assessed?

A dissolved S-corp can still file a refund claim if it has sufficient signatory authority remaining (typically the last responsible officer or successor). This is one of the situations where talking with a qualified tax professional is most useful.

How does the §6699 monthly cap interact with Kwong?

§6699 caps the penalty at 12 months. If your full 12-month cap was assessed during the disaster window, the entire assessed amount may be eligible to challenge under the Kwong reasoning — not just the months strictly inside the window.