Greetings all...

I've have made some poor decisions in the past which obviously can't be undone. At this point, I'm trying to determine the best strategy to get things rectified while attempting to minimize IRS fees and penalties.

I provide IT support to small businesses and started a new LLC in 2010 that I registered as an S-Corp. I have not filed any taxes (personal or corp) up until a couple of months ago. At that time, I filed 2010 returns for both. My company is very small and essentially is a second job for me (I maintain a standard 40-hour/week job which is my primary income). I created the LLC/S-Corp to 1) provide personal liability protection, and 2) take advantage of corporate tax benefits.

My corporate tax liability was $0 for 2010. However, I received a letter from the IRS stating that they were assessing me a tax penalty for failure to file. The penalty was $2340 (12 x $195/mo, max of 12 months). I understand why they are assessing the penalty. However, this is a sizable penalty for me to absorb. Additionally, I know I will be hit with similar penalties for 2011-2012, and I'll be adding to that monthly for 2013 until I file. I'm going to try to work with the IRS to try to get them to reduce the penalty, but very well realize they may not. Regardless. I would like to take the strategy that has the greatest likelihood of succeeding.

What strategy should I pursue?

1. Get everything filed as quickly as possible, then attempt to work with the IRS?
2. Respond immediately to the IRS letter and try to negotiate on the 2010 return?
3. Other strategies (please advise)?

I look to try to maintain the LLC/S-Corp, but would also be willing to dissolve it and go back to a single member LLC or even sole-proprietorship. My business has decreased significantly in the past year, and so it may not be worth the hassle to maintain it. In the long run, I want to do what makes sense.

Any advice and recommendations you have are greatly appreciated. Thanks in advance!