Penalties

Late Filing of Return A penalty is assessed against the partnership if it’s required to file a partnership return and it (a) fails to file the return by the due date, including extensions; or (b) files a return that fails to show all the information required, unless such failure is due to reasonable cause. The penalty is $255 for each month or part of a month (for a maximum of 12 months) the failure continues, multiplied by the total number of persons who were partners in the partnership during any part of the partnership’s tax year for which the return is due. If the partnership receives a notice about a penalty after it files the return, the partnership may send the IRS an explanation and the IRS will determine if the explanation meets reasonable-cause criteria. Don’t attach an explanation when filing the return.

Failure To Furnish Information Timely For each failure to furnish Schedule K-1 (and Schedule K-3, if applicable) to a partner when due and each failure to include on Schedule K-1 (and Schedule K-3, if applicable) all the information required to be shown (or the inclusion of incorrect information), a $340 penalty may be imposed for each Schedule K-1 (and Schedule K-3, if applicable) for which a failure occurs. For all such failures during a calendar year, the maximum penalty for entities with gross receipts over $5,000,000 is $4,098,500; and $1,366,000 for entities with gross receipts at or below $5,000,000. If the requirement to report correct information is intentionally disregarded, each $340 penalty is increased to $680 or, if greater, 10% of the aggregate amount of items required to be reported. There’s no limit to the amount of the penalty in the case of intentional disregard.

Trust Fund Recovery Penalty This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld aren’t collected or withheld, or these taxes aren’t paid. These taxes are generally reported on:

• Form 720, Quarterly Federal Excise Tax Return;

• Form 941, Employer’s QUARTERLY Federal Tax Return;

• Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees;

• Form 944, Employer’s ANNUAL Federal Tax Return; and

• Form 945, Annual Return of Withheld Federal Income Tax.

The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the unpaid trust fund tax. See the Instructions for Form 720; Pub. 15 (Circular E), Employer’s Tax Guide; or Pub. 15-T, Federal Income Tax Withholding Methods, for more details, including the definition of a “responsible person.”