Penalty on Partnership Tax Return

[KKR2]

Hi!  In 2019 I opened an online business as a LLC with my husband.  I did not make any money that year.  I actually had a loss.  I was 3 1/2 months late in filing my tax return.  I received a letter today from the IRS with a penalty amount due.  They indicate on the letter that it is $200 for each person who was a partner at any time during the tax year, for each month or part of a month the return was late, for up to 12 months.  Since I did not make any money, can I avoid this penalty and if not, would you agree that the penalty amount should be $1100?

Thank you.

[Anonymous_]

The penalty [for failure to timely file] is $205 for each month or part of a month (for a maximum of 12 months) the failure continues, multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year for which the return is due.

See page 5 https://www.irs.gov/pub/irs-prior/i1065--2019.pdf

In an effort to get the penalty waived, you have the option of sending an explanation to the IRS which will determine if your explanation meets reasonable-cause criteria.

See https://www.irs.gov/pub/irs-utl/36-Responding%20to%20IRS%20Proposed%20Penalties.pdf  AND

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-reasonable-cause

[KKR2]

Thank you very much for your answer and assistance.

[Mike9241]

technically the penalty should have been $205 (the penalty for filing 1 month or fraction thereof late for 1 partner) x 2 (number of partners) X 4 (number of whole and fractional months late) = $1640. the fact there were no profits is irrelevant.

3/15/19 to 4/15/19 is one month late. file on 4/16/19 and you now are 2 months late (1 month and a fraction) 

writing a letter and asking the penalty be abated usually works if this is the first time the return was filed late.

hopefully, you filed the 2020 return timely.

[Carl]

To help clarify things, the late filing penalty has nothing to do with the tax liability, and it doesn't matter if you made money or not. The late filing penalty is because you did not file the 1065 tax return by the March 15th deadline.

Personal 1040 tax returns have a filing deadline of Apr 15th (normally) while all other types of tax returns (1056, 1120, 1120-S) have a filing deadline of March 15th.

Now while the IRS did extend the 2020 tax filing deadline for personal 1040 tax returns, they did not extend it for any other type of return. (Unless I missed something in the IRS announcements they post at irs.gov)

[Anonymous_]

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@Carl wrote:

Personal 1040 tax returns have a filing deadline of Apr 15th (normally) while all other types of tax returns (1056, 1120, 1120-S) have a filing deadline of March 15th.

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Form 1120 (return for a C corporation) has a filing deadline of  the 15th day of the 4th month after the end of the C corporation's tax year. For calendar year corporations, that would be April 15, 2021 for the 2020 tax year, not March 15th.

[Critter-3]

Correct ... only pass thru companies have a 3/15 due date.  An 1120 is it's own entity and as such their due date is the same as a personal return... 15th day of the 4th month.