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Paying a late filing penalty on your taxes can significantly add to the cost of your taxes for the year. If you are paying taxes on a partnership, however, you will potentially be able to get some relief from the IRS. Here are a few things to consider about filing late as a partnership.
Filing Taxes
When you are in a partnership, you are going to have to file your own personal taxes that include income received from the partnership. In addition to filing these taxes, you are also going to have to file a separate tax return for the partnership. According to IRS rules, you have to file your tax return for the partnership by April 15. If you do not file your taxes, a late filing penalty might be assessed.
Automatic Extension
Partnerships are eligible for an automatic extension beyond the April 15 deadline. In order to get this extension, the partnership will only have to file Form 8736 with the IRS. This is going to automatically extend the deadline for another three months. In order to qualify for this extension, you do not have to provide any reason to the IRS. As soon as you ask for it, you are going to be granted the extension. With this extension, you are going to have until July 15 to file your partnership tax return.
Additional Extension
If you are still unable to get your taxes filed by July 15 of the following year, you could potentially get another extension for your partnership. In order to do this, you are going to need to file Form 8800 with the IRS. With this process, you are going to have to provide a legitimate reason that you are unable to complete your taxes up to this point. If you have a legitimate reason, the IRS could potentially grant you another three months to work with. This would extend your tax filing deadline until October 15.
Penalty
If you do not file your taxes according to your current deadline, the IRS is going to impose a late filing penalty on your partnership. The penalty amounts to $50 per month for each partner. Therefore, if you file five months late and you have three partners working together, you are going to have to pay $750.
Penalty Relief
Under the current IRS rules, there is a provision that will allow you to get out of paying the $50 per month, per partner penalty. If you meet certain requirements, you will be able to completely avoid this fee. This provision is known as Rev. Proc. 84-35. In order to qualify for this process, you will have to provide the IRS with some basic information about your partnership. You will have to prove that every member of the partnership is not a nonresident alien. You will also have to show that every partner has equal ownership of every item that is owned by the partnership. They also have to show that every partner has already filed their personal taxes. As long as you can meet these requirements, you can typically get around paying the late filing fee.
