Failure To File Partnership Tax Return Penalty Frequently Asked Questions

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David M. Kaufmann, CPA

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Note: This is a complicated subject. We will only touch on some topics. We recommend that you talk these issues over with an attorney and a CPA.

What is the penalty for failure to file a partnership tax return?
What happens if the IRS sends me a notice that I have failed to file a partnership tax return?
Can the partnership get out of the failure to file a partnership tax return penalty?
Are there any special cases of reasonable cause for partnership tax returns?
What should you do if the IRS tries to hit you with the failure to file a partnership penalty?
Don't Pay This Penalty Without Talking To Us First!
 

 What is the penalty for failure to file a partnership tax return?

$89 per partner per month for tax years ending on December 31, 2009. Thus, if a 2 person partnership was 3 months late, the penalty would be $534 ($89 x 2 x 3).

For tax years ending after December 31, 2009, the penalty for failure to file a partnership tax return is $195 per partner per month.

What happens if the IRS sends me a notice that I have failed to file a partnership tax return?

You better respond as soon as possible. If you want to fight the IRS on this, do it quickly. If you don't want to fight the IRS, pay the penalty as soon as possible.

If the IRS has not processed your response to their first notice within 30 days of mailing the notice, you are likely to receive a letter requesting payment of the penalty with the intent to levy your assets.

Realize that the IRS may not be speedy in processing your response!

Can the partnership get out of the failure to file a partnership tax return penalty?

If you can prove that there is reasonable cause, you can get the failure to file a partnership tax return penalty abated (removed).

Typical examples of "reasonable cause" would be health issues or natural disasters.


Are there any special cases of reasonable cause for partnership tax returns?

There should be no failure to file penalty for "small partnerships" defined as follows:

  • There are 10 or fewer partners.
  • All items of income, deductions, credits, etc from the partnership have been properly reported on a timely basis on the partners' individual tax returns.
  • Partnership allocation percentages are the same for all partnership tax attributes.

What should you do if the IRS tries to hit you with the failure to file a partnership penalty?

  1. Respond quickly. If there is a phone number on the IRS notice, call it ASAP. Let the IRS know that you are responding in writing, and what your argument is. If you are real lucky, the IRS employee will abate the penalty right then and there. If you are not that lucky, the IRS has been informed that you are working on the issue.
  2. Respond in writing if needed. If the small partnership exception (10 or fewer partners, as described above), mention that. Send this letter certified for proof of mailing.
  3. If the IRS sends an intent to levy letter to you before they respond to your letter (point 2), call the IRS to let them know that you have previously responded, and that they should delay any legal action until you have a chance to review their response to your letter.

Don't Pay This Penalty Without Talking To Us First!

If you need assistance with this, [after all, this is what we do] contact us at 720-493-4804.

If we work together on this, our price would be a percent of what the penalty would be, and we would give you a full refund, if we are not able to reduce or eliminate the penalty.


If you have questions about this, do not hesitate to contact us at 720-493-4804.

Circular 230 Notice:

The information contained here are simplifications of complex subjects. We recommend that you talk to a CPA about this issue.

To ensure compliance with requirements imposed by the IRS, we inform you that (i) any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.