Partnership Tax Returns: Late Filing Penalties and Exceptions

The penalty for late filing of the partnership return is $195 per partner per month or part of a month for which the partnership information return is filed late, with the penalty capped at 12 months.

The penalty is waived if the failure to file is due to reasonable cause [Sec. 6698]. Small partnerships are considered to have met the reasonable cause exception if certain tests are met [Rev. Proc. 84-35].

Small Partnership Exception to Late Filing Penalty Domestic partnerships composed of ten or fewer partners and meeting other tests are considered “small partnerships” exempt from the late or non-filing penalty. Each partner in a small partnership must be an individual (other than a nonresident alien), a C corporation or an estate of a deceased partner. Spouses (and their estates) are treated as one partner for the ten or fewer count [Rev. Proc. 84-35].

As an additional small partnership requirement, all items of income, deductions, and credits must be allocated in proportion to the pro-rata interests. And to qualify for the reasonable cause exception to the late filing penalty, the small partnership or any of its partners must establish that all partners have fully reported their shares of the income, deductions and credits of the partnership on their timely filed income tax returns [Rev. Proc. 84-35, sec. 3.01].

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