Filing Form 1065, the U.S. Return of Partnership Income, is a crucial compliance requirement for partnerships in the United States. This form reports the partnership’s income, deductions, gains, and losses, and provides each partner with a Schedule K-1 to report their share on their individual tax returns. However, filing Form 1065 late can lead to significant penalties. In this detailed blog, we’ll explore the penalties partnerships face for late filing in 2025, how these penalties are calculated, and what steps can be taken to mitigate or avoid them.
📅 Form 1065 Filing Deadline
For calendar-year partnerships, Form 1065 is due on the 15th day of the third month following the end of the tax year. For the 2024 tax year, the filing deadline is March 15, 2025. If this date falls on a weekend or holiday, the due date is the next business day. Partnerships can request an automatic six-month extension by filing Form 7004 by the original due date, extending the deadline to September 15, 2025. It’s important to note that this extension only applies to filing the return; any taxes owed are still due by the original deadline.
⚠️ Penalties for Late Filing
If a partnership fails to file Form 1065 by the due date (including extensions), the IRS imposes a penalty. The penalty is calculated as follows:
- $235 for each month or part of a month the return is late, multiplied by the number of partners in the partnership during any part of the tax year.
- The penalty applies for up to 12 months.
For example, if a partnership with 10 partners files its return 3 months late, the penalty would be:
$235 × 3 months × 10 partners = $7,050
This penalty can accumulate quickly, making timely filing essential to avoid substantial costs.
📌 Minimum Penalty for Returns Over 60 Days Late
If a partnership’s return is more than 60 days late, the minimum penalty is the lesser of:
- $510
- 100% of the unpaid tax
This minimum penalty applies regardless of the number of partners or the length of the delay, emphasizing the importance of filing as soon as possible to minimize penalties.
💡 Additional Considerations
It’s important to note that:
- The penalties apply to the partnership, not to individual partners.
- Penalties are assessed for each month the return is late, up to 12 months.
- Filing an extension does not extend the time to pay any taxes owed; payments are still due by the original deadline.
🛡️ Mitigating Penalties
If a partnership has a reasonable cause for filing late, it may request penalty abatement. This involves providing a written explanation to the IRS detailing the circumstances that led to the late filing. Common acceptable reasons include:
- Serious illness or death of a partner or key staff member.
- Natural disasters or other events beyond the partnership’s control.
- Incorrect advice from a tax professional.
It’s crucial to submit any requests for penalty abatement promptly and to keep thorough documentation supporting the claim.
✅ Final Thoughts
Filing Form 1065 late can result in significant penalties for partnerships. Understanding the filing deadlines, the penalty structure, and the options available for mitigating penalties can help partnerships stay compliant and avoid unnecessary costs. If your partnership is facing challenges with timely filing, consider consulting a tax professional to navigate the complexities and ensure compliance with IRS requirements.
