The IRS Penalty for a Late-Filed Form 1065 (U.S. Return of Partnership Income)
Form 1065, U.S. Return of Partnership Income, is the annual information return partnerships use to report income, deductions, gains, losses, and other financial details to the Internal Revenue Service (IRS). Unlike corporations, partnerships do not pay income tax at the entity level. Instead, the profits and losses “flow through” to the individual partners via Schedule K-1.
Because of this pass-through structure, timely filing is critical. A late-filed Form 1065 doesn’t just impact the partnership itself—it also delays the delivery of Schedule K-1s, which partners need to file their own tax returns. To enforce compliance, the IRS imposes penalties on partnerships that miss the filing deadline.
Filing Deadline for Form 1065
The standard due date for filing Form 1065 is:
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March 15 for calendar-year partnerships (the 15th day of the third month after the end of the tax year).
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Partnerships can request a six-month extension using Form 7004, which typically pushes the deadline to September 15.
Late Filing Penalty
The IRS assesses a penalty under IRC § 6698 for failing to file a complete and timely Form 1065.
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Amount:
$245 per partner, per month (for returns due After 12/31/2024; this amount is periodically adjusted for inflation). -
Duration:
Up to 12 months.
Example
If a partnership with 4 partners files its return 3 months late, the penalty would be:
$245 × 2 partners × 3 months = $1,470
This penalty applies even if the partnership had no income, no expenses, or no tax due for the year.
Late or Missing Schedule K-1s
In addition to the partnership return, the IRS requires that Schedule K-1s be issued to all partners. Failure to provide these forms on time may trigger separate penalties under IRC § 6722 for failure to furnish statements to partners.
Reasonable Cause Exception
The IRS may waive penalties if the partnership can show that the failure to file was due to reasonable cause and not willful neglect. Common grounds for reasonable cause include:
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Natural disasters or serious illness.
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Records destroyed by events beyond the taxpayer’s control.
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Reliance on erroneous IRS written advice.
A written explanation should accompany the late-filed return or be submitted in response to an IRS penalty notice.
Key Takeaways
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File Form 1065 by March 15 (or September 15 with extension).
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Late filing penalties are severe and increase with the number of partners and months delayed.
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Each Schedule K-1 must also be timely furnished to partners to avoid additional penalties.
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If unavoidable delays occur, partnerships should document circumstances thoroughly and request a reasonable cause abatement.
✅ Bottom line: Partnerships must prioritize timely filing of Form 1065 and distribution of Schedule K-1s to avoid costly IRS penalties and ensure partners can meet their own tax obligations.
