A common problem for taxpayers with closely held businesses is getting returns filed on time. Entrepreneurs are often focused on trying to build business - or sometimes just trying to survive.
Tax compliance is something that can fall by the wayside. But this leads to problems.
In the case of a partnership (or LLC taxed as a partnership) the return due date is April 15th unless a extension is requested. The 5-month extension gives the partnership until October 15th to file.
So what is the big deal with filing a partnership return late?
After all, the partnership normally doesn’t even pay tax – it flows through to the partners.
Well, the IRS has made not filing the partnership return a big deal.
The penalty penalty for failure to timely file is $195 per month and per partner for up to a year.
So if you have a 10 person partnership that fails to file the Form 1065 for just 2 months – you are looking at a penalty of $3,900 ($195 x 10 partners x 2 months).
There are even circumstances where the individual partners can be liable for the failure to file penalty!
If the partnership does get assessed the penalty – one potential solution is arguing that the failure was due to reasonable cause. This can be a difficult argument.
Most importantly, having good accounting help is instrumental to a successful business.
Not only do you keep in compliance with taxing authorities – but you are able to gauge the success of your business. It also enables you to make smart business decisions to grow revenues and keep costs in check.