Relief From Penalties on a Small Partnerships for Late Filing

By Ron Cohen, CPA, MST
Partner
Greenstein, Rogoff, Olsen & Co., LLP
Posted: 10/7/11

While a Form 1065 Partnership return results in no tax due by the partnership, the IRS demands the forms be filed on time so that the partners have information to compute and pay their taxes using Schedule K-1 coming from the Form 1065 return.

Therefore, when a partnership return is filed late, the penalties are $195 per partner, per month for 12 months.
See Page 4:
http://www.irs.gov/pub/irs-pdf/i1065.pdf

For a small partnership, this is pretty extreme, so the IRS adopted this policy following Revenue Procedure 84-35. If you can answer the below questions “yes”, the penalties will be waived.

http://www.irs.gov/pub/irs-sca/0135029.pdf

1. Is this a domestic partnership?
2. Are there 10 or fewer partners?
3. Are all partners a natural person (other than a nonresident alien) or an estate?
4. Is each partner’s share of each partnership item the same as his share of every other item (a husband and wife and their estate shall be treated as one partner)?
5. Have all the partners fully reported their share of the income, deductions and credits of the partnership on their timely filed income tax returns?

If the answers to all of the above questions are “Yes,” please sign this form and return it with a copy of the penalty assessment. You do not owe the penalty.