Partnerships and S corporations owe no federal income tax, so their late filing penalty cannot be a percentage of tax. It is a fixed amount per owner, per month, for up to twelve months. For returns due in 2026 the base amount was $255. It is indexed for inflation and the current figure is in the return instructions each year.
The arithmetic
Base rate, times the number of people who were partners or shareholders at any point in the year, times the number of months or partial months late, capped at twelve months. A six-owner company, three months late: $255 times 6 times 3, or $4,590. The same penalty applies to a return filed on time but missing required information, such as K-1s.
Small partnership relief
Rev. Proc. 84-35 treats reasonable cause as established for a partnership that had ten or fewer partners, all of whom were individuals (or estates), none a nonresident alien, where every partner filed their own return on time and reported their share of the partnership items. Ask for it by letter or by phone in response to the penalty notice. This relief is for partnerships only; S corporations rely on first-time abatement or ordinary reasonable cause.
First-time abatement
It applies to these penalties too, on the same three-year clean history test.
Common mistake
The entity's owners each file on time and assume the entity is fine. The entity is a separate filer. A perfect set of individual returns does not cure a missing Form 1065 or 1120-S, though under 84-35 it can excuse the penalty.
Sources
- IRS, Failure to file penalty, partnership and S corporation rates
- IRS, Understanding your CP162B notice
- Internal Revenue Code sections 6698 and 6699