Late Filing Penalties for Partnerships
The penalty for filing a partnership tax return late is $195 per month or part of a month for each partner, up to a maximum of 12 months. If you fail to pay any tax owed by the due date, you may also be subject to penalties and interest charges. The penalty for failing to pay the tax owed is 0.5% of the unpaid tax for each month or part of a month the tax remains unpaid, up to a maximum of 25% of the unpaid tax.
IRS Relief Procedures
In 1984, the IRS published Revenue Procedure 84-35. It outlines eligibility and procedures to request late filing penalties relief for partnerships. Revenue Procedure 84-35 requirements are:
- The Partnership had no more than ten partners for the taxable year.
- During the tax year, each partner was a natural person or a natural person’s estate.
The late filing penalty is $200 per Schedule K-1 for each month or part of a month that a tax return is late, up to a maximum period of twelve months or $2,400 per Schedule K-1.
Penalties include payroll tax penalties and any other nondeductible penalty or fine.There is a minimum penalty that can be imposed, even if the return is only one day late. There is also a maximum penalty that can be imposed for late filing.
Abating Penalties
How do you abate a partnership late filing penalty?
The IRS provides relief procedures for eligible small partnerships. The requirements for relief are:
- Ten or fewer partners who were natural persons or estates.
- Reasonable cause for late filing.
Your tax professional may help with penalties by requesting abatement due to reasonable cause or first-time abatement.
To avoid penalties, file all required returns timely. If reasonable cause exists, penalties may qualify for abatement, but delayed filing should not be a strategy.