Partnerships (Form 1065) and S corporations (Form 1120-S) usually pay no federal income tax themselves, since the income passes through to the owners. So many business owners assume a late return is harmless. It isn't. Congress created a special penalty for late pass-through returns, and it's built to sting regardless of tax owed:
A three-partner LLC that files its 1065 five months late owes 5 × $255 × 3 = $3,825, with zero tax due on the return. A ten-partner firm that misses a full year owes 12 × $255 × 10 = $30,600.
The per-owner amount, year by year
The amount is inflation-adjusted annually. It's keyed to the calendar year the return was due, so a late 2023 partnership return (due March 2024) uses the 2024 amount:
| Return due in | Per owner, per month |
|---|---|
| 2018 – 2019 | $200 |
| 2020 | $205 |
| 2021 – 2022 | $210 |
| 2023 | $220 |
| 2024 | $235 |
| 2025 | $245 |
| 2026 | $255 |
Source: IRS, "Failure to File Penalty" (irs.gov). The same schedule applies to both partnerships and S corporations.
Five things that surprise people
- The clock starts in March, not April. Calendar-year 1065s and 1120-S returns are due the 15th day of the third month. That's mid-March, a month before the individual deadline. See the deadline tables.
- "Part of a month" counts as a month. Filing one day past the deadline is one full month of penalty.
- Every owner counts, including ones who joined for only part of the year (the IRS counts anyone who was a partner/shareholder at any time during the year).
- An extension helps only if you use it. Form 7004 moves the deadline six months (to mid-September). File even one day past that and the penalty counts months from the September date.
- No interest accrues before the IRS bills you. Unlike the individual late-filing penalty, these per-owner penalties don't accrue interest from the return due date. Interest starts only after the IRS sends notice and demand.
Three ways to get it removed
- First-time abatement. If the entity filed and paid on time for the prior three years, the IRS's First Time Abate waiver applies to §6698/§6699 penalties, and it's often granted with one phone call. Full guide with a letter template.
- Rev. Proc. 84-35 (small partnerships). A domestic partnership with 10 or fewer partners, all individuals or estates, equal allocations, and owners who reported their shares on timely personal returns is presumed to have reasonable cause.
- Reasonable cause. Serious illness, disaster, destroyed records, or reliance on bad professional advice. It needs to be documented, but it works.
Estimate your exact number
Our calculator applies the correct per-owner amount for your year, the 12-month cap, and any entity-level tax with interest: