"We charged a penalty on your Partnership tax return"

9 Replies

Hi Everyone,

I received a notice from the IRS saying My LLC that has four members was charged a fee because according to the IRS we "filed the partnership return late."

The amount is $4,920.  ($205 per partner per month) x (4 partners) x (6 months).


According to the notice, the tax period listed is June 30, 2020. Which is a weird date to me. Either way, this LLC provides K-1s to the partners. We filed the LLC tax return via turbo tax business in March of 2020 and then the partners filed their K-1s with their returns.


I've tried calling the IRS 3 times about this.  2 times I've got a message saying that the call volume for my topic is extremely high and to call back.  The other time I was on hold for 2 hours just to get hung-up on.

This is one of 3 partnership returns we filed last year, and so far no issues with the other.


Wondering if anyone else has run into this and what the outcome was?

Originally posted by @Sam Erickson :

Hi Everyone,

I received a notice from the IRS saying My LLC that has four members was charged a fee because according to the IRS we "filed the partnership return late."

The amount is $4,920.  ($205 per partner per month) x (4 partners) x (6 months).


According to the notice, the tax period listed is June 30, 2020. Which is a weird date to me. Either way, this LLC provides K-1s to the partners. We filed the LLC tax return via turbo tax business in March of 2020 and then the partners filed their K-1s with their returns.


I've tried calling the IRS 3 times about this.  2 times I've got a message saying that the call volume for my topic is extremely high and to call back.  The other time I was on hold for 2 hours just to get hung-up on.

This is one of 3 partnership returns we filed last year, and so far no issues with the other.

Wondering if anyone else has run into this and what the outcome was?

Did you select your tax period to end June? Double check top of your filed return on page 1 of 1065. 

@Ashish Acharya thanks for the reply.  I Just checked, and here is what is says:

"For the calendar year 2019, or tax year beginning ___________, 2019, ending __________, 20__."

The blanks are still blank on my 1065.  So assuming that means I'm then filling for the calendar year?

What did your accountant say?

Was last year's return filed timely? If you mailed the extension, they are still not caught up on processing them. 

@Steven Hamilton II

Thanks for the response. It was filed in March of 2020 with no extension.

This LLC is a single property LLC so I file the return myself and have done so for the last few years, never been late before.

I've attached my E-file status from Turbo Tax.  When I first got the notice I was nervous that perhaps I completed the return, sent the K-1s out but never actually filed it.  Since the status is accepted though that's not the case, and I know I didn't do an extension and I know it was filed on time.


Sidenote: do you have any experience on how to actually get ahold of someone at the IRS?  Like I stated above have tried 3 times with no luck.


Honestly, I wouldn't bother calling, I'd send a letter and wait. No point in waiting on hold for so long. You can pay it and then they will refund with interest if you're paranoid about it; however, try at 7am local time or as I said send a letter and not worry about it until you get a response about 14 months later. 

You filed the tax period ending December 31, 2019 return in March of 2020.  That doesn't seem to be the issue.

Unless you made a typo, you specifically stated the notice is for the tax period ending June 30, 2020.

Did you file the 2020 returns yet?  If yes, that's the return you should be looking at, not the 2019 return.

If the 2020 return has a tax period ending June 30, 2020 on it, perhaps because it's a final return or because the LLC made a mid-year corporate tax election, and you filed this return last month, you may have stepped on a landmine.

There may be ways to get the penalty abated if it is legitimate but the interest, if any is assessed, is going to stick.

@Eamonn McElroy

Thanks for the response. Not sure why I didn't think about this before but you are correct. We did file the 2020 return and we filed it as a final return. The property that, that LLC held was sold in June 2020. Since that was the only property that LLC held and that partnership group isn't going to be buying future property I put June 30, 2020, as the final day of business because of that.

I could have just as easily put 12/31/2020 now that I think about it.  All The state filings etc. ran through the end of the year.

So if you stop doing business, you are supposed to file your tax return for that year immediately?  Could I amend and change the final day of business to 12/31/2020 or is it too late?


A 1065 is generally due on the fifteenth day of the third month after the end of the tax period.

A 1065 with a tax period ending June 30, 2020 is due September 15, 2020.  If you don't file an extension on or before that date, and file the 1065 between February 16, 2021 and March 15, 2021 you have filed your return 6 months late.

One doesn't just put an arbitrary date for the tax period. Ideally all liabilities are extinguished, all assets are liquidated and distributed, and the LLC is dissolved with the state soon before the end of the tax period on a final return.

If you intend to keep on DIYing 1065s, it might benefit you to be aware of these concepts.

It's going to take a lot of your time to convince the IRS that you put a wrong tax period ending date on the return and get that corrected...  Therefore, if you were my client, I'd generally approach this by: (1) asking for a First Time Abatement (FTA) of the penalties if the FTA is available and if everything was wrapped up by December 31, 2020,  or (2) abatement under Rev Proc 84-35 if the partnership qualifies and the FTA is not available.  You can google these and learn more.

But then again, if you were my client, this never would have happened.  :)  Most practitioners are keenly aware that a short-period final return generally won't have the same due date as a regular calendar year return.  This is a "101" level concept as far as 1065s go and might make you rethink DIYing entity returns.