The Internal Revenue Service defines a partnership as a relationship between two or more individuals in a business or trade. Partnerships file IRS Form 1065, which carries a penalty of $195 a month per partner, up to a maximum of one year. The IRS counts partial months as full months, so waiting to file can be costly. Most U.S.-based partnerships must file Form 1065 every year.
The partnership members must file Form 1965 by the 15th day of the fourth month following the end of their fiscal year. If an extension is necessary, they must file Form 704 by the filing deadline. An automatic two-month extension is available to partnerships that keep their records outside of the U.S. Late-filed returns accumulate penalties for each month or partial month after the filing deadline, including extensions. Partnerships may be able to avoid the penalty with a reasonable explanation for the delay, which can be an event out of their control like a natural disaster. Form 1065 must be signed by a general partner or certain other authorized persons. Without the proper signature, the IRS considers it invalid and may issue late fees. Failure to pay an IRS penalty can result in levies and/or wage garnishment by the IRS.
- g-stockstudio/iStock/Getty Images