Late Tax Filing Penalties for LLC’s – They can be waived!

Late filing penalties are assessed by the IRS any time you file a return later than the specified deadline. And while it’s possible to have these waived if you can show “reasonable cause,” the standard you have to meet to demonstrate this is usually pretty high. As a result, late filing penalties are rarely removed.

But LLC late filing penalties and partnership returns (Form 1065) are a significant exception. So if you receive a late filing penalty for your LLC, don’t give up just yet. In all likelihood the penalty can be waived simply by making the proper request.

Starting in 1984, Congress encouraged the IRS to be lenient with regards to small corporations and late filing issues. In response, the IRS issued Revenue Procedure 84-35 which defined the criteria for automatically waiving the late filing penalty. It essentially required that the entity have 10 members or less, and that each of the members had filed their own return on time. There are other specific items to meet but this is the essence. And so long as these criteria are met, the penalties will be waived.

Over the years, additional revenue procedures have also been released to handle specific situations. These were all consolidated in Revenue Procedure 2013-30 which contains all of the various methods for waiving late filing penalties.

So if you end up having to file a late partnership return for your LLC, the penalty most likely can be waived. You’ll have to wait until the penalty is assessed – you’ll know this has occurred when you receive the notice letter from the IRS. But once you get the letter, send a request for abatement referencing the applicable revenue procedure or have your tax professional handle it for you. It may take a little while for the IRS to process the request, but in our experience 99% of these penalties are ultimately waived.