Reasonable Cause for Late Filing of Partnership Income Tax Returns

Posted on June 17 2010 by admin

I have previously blogged about the penalties the IRS will impose on late filing Partnership income tax returns. To refresh your memory, the late filing penalty for a 2009 Partnership return is $89 for each month the return is late multiplied by the total number of partners in the Partnership. The penalty jumps to $195 per in 2010. As always, no penalty will be imposed if the Partnership can show that the late filing was due to reasonable cause.

What exactly does the IRS think is reasonable cause to file a Partnership return late? IRS Rev. Proc. 84-35 shows an example of reasonable cause. The following qualifications must be met in order for the Partnership to show reasonable cause and abate the late filing penalty.

1. The Partnership must be a domestic partnership.

2. The Partnership must have ten or fewer partners, each of whom is an individual (other than a nonresident alien) or an estate of a deceased partner.

3. Each partner’s share of each partnership item is the same as his share of every other partnership item.

4. The partnership, or any of the partners, establishes, if so requested by IRS, that all partners have fully reported their shares of the income, deductions, and credits of the partnership on their timely filed income tax return.

Does this reasonable cause excuse work? My experience in using Rev. Proc. 84-35 has been successful when the partners and the partnership meet these specific qualifications. What if your situation does not fall under these qualifications? Well, let’s just hope you have a very good legitimate reason for not filing your partnership return on time.

Steven B Schwartz, CPA

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