Everyone knows that the IRS charges you a penalty if you file your income tax return late. As most of us know, that the penalty is a percentage of the amount of taxes owed. But what about Partnerships that pass-through their income to their partners, and pay no income tax? Is there a penalty for filing a Partnership income tax return late? Of course, knowing the IRS, there must be.
For tax years beginning in 2009, the late filing penalty for a Partnership income tax return is $89 for each month the return is late multiplied by the total number of partners in the Partnership. So a 5 partner Partnership that is 4 months late in filing their Partnership return will incur a penalty of…$1,780! As always, no penalty will be imposed if the Partnership can show that the late filing was due to a reasonable cause.
As a reminder, filing late is defined as filing after the due date. For calendar year Partnerships, that date is the following April 15th. If they filed a valid 5 month extension on IRS Form 7004, then the extended due date for filing will be on September 15th.
In 2010, it gets much worse. The late filing penalty for a 2010 Partnership income tax return will increase to $195 for each month the return is late multiplied by the total number of partners in the Partnership. So that same 5 partner Partnership that is 4 months late in filing their Partnership return without a reasonable cause, will incur a penalty of…are you sitting down…$3,900!
Arizona’s late filing penalty for Partnerships is slightly less costly. The penalty for filing Arizona Form 165 late is $100 per month regardless of the number of partners, up to a maximum penalty of $500.
The IRS (& Arizona) do not like procrastinators, not even Partnership procrastinators!
Steven B Schwartz, CPA
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