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Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Sat Jul 25, 2020 3:29 pm
by HomeStretch
I received an IRS notice saying Form 1065 for tax year 2019 was filed late and a $1,200 penalty is due ($200/month penalty x 3 months x 2 partners). There is no interest owed as the partnership had a small loss for 2019 and did not have any tax liability.

I filed Form 1065 in early June. I did not file an extension this year as I usually do as I didn't want to go to the post office to send it certified mail with the pandemic going on. Rather I relied on (or thought I was) the automatic three-month COVID-related extension granted in IRS Notice 2020-23. I checked the news release about the Notice on the IRS website found here: https://www.irs.gov/coronavirus/coronav ... -deadlines. The news release clearly lists Form 1065 under "Businesses" as being due on 7/15/2020.

However, as I now re-read IRS Notice 2020-23, it states that the automatic 3-month extension applies to 2019 returns due after 4/1/2020. The Form 1065 deadline is 3/15/2020. So it looks like the IRS news release and the IRS Notice conflict regarding the Form 1065 extended due date. Or maybe it's meant to only apply to a Form 1065 with a previously filed extension?

Any advice on whether the penalty is correctly assessed? If yes, any advice as to whether attaching the IRS news release (last updated 7/20/2020) with the incorrect 7/15/2020 due date for Form 1065 will be enough to have the IRS waive the penalty? Any other suggestions to help make my case to the IRS? Thanks.

Re: Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Sat Jul 25, 2020 5:37 pm
by MarkNYC
HomeStretch wrote: Sat Jul 25, 2020 3:29 pm I received an IRS notice saying Form 1065 for tax year 2019 was filed late and a $1,200 penalty is due ($200/month penalty x 3 months x 2 partners). There is no interest owed as the partnership had a small loss for 2019 and did not have any tax liability.

I filed Form 1065 in early June. I did not file an extension this year as I usually do as I didn't want to go to the post office to send it certified mail with the pandemic going on. Rather I relied on (or thought I was) the automatic three-month COVID-related extension granted in IRS Notice 2020-23. I checked the news release about the Notice on the IRS website found here: https://www.irs.gov/coronavirus/coronav ... -deadlines. The news release clearly lists Form 1065 under "Businesses" as being due on 7/15/2020.

However, as I now re-read IRS Notice 2020-23, it states that the automatic 3-month extension applies to 2019 returns due after 4/1/2020. The Form 1065 deadline is 3/15/2020. So it looks like the IRS news release and the IRS Notice conflict regarding the Form 1065 extended due date. Or maybe it's meant to only apply to a Form 1065 with a previously filed extension?

Any advice on whether the penalty is correctly assessed? If yes, any advice as to whether attaching the IRS news release (last updated 7/20/2020) with the incorrect 7/15/2020 due date for Form 1065 will be enough to have the IRS waive the penalty? Any other suggestions to help make my case to the IRS? Thanks.
Since the filing due date was 3/15, the penalty is probably correctly assessed, but there may be some relief available.

If the following conditions are met, the IRS will consider the late-filing as due to reasonable cause and fully-abate the penalty:

- 10 or fewer partners, and all US residents
- all partners filed their personal returns on time and reported all partnership items
- the partnership did not elect to be subject to the consolidated audit procedures

You should google Revenue Procedure 84-35 and "small partnership late penalty abatement" for more specific information on the requirements and the proper procedure for requesting the penalty abatement.

Re: Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Mon Jul 27, 2020 7:10 pm
by HomeStretch
MarkNYC wrote: Sat Jul 25, 2020 5:37 pm
HomeStretch wrote: Sat Jul 25, 2020 3:29 pm I received an IRS notice saying Form 1065 for tax year 2019 was filed late and a $1,200 penalty is due ($200/month penalty x 3 months x 2 partners). There is no interest owed as the partnership had a small loss for 2019 and did not have any tax liability.

I filed Form 1065 in early June. I did not file an extension this year as I usually do as I didn't want to go to the post office to send it certified mail with the pandemic going on. Rather I relied on (or thought I was) the automatic three-month COVID-related extension granted in IRS Notice 2020-23. I checked the news release about the Notice on the IRS website found here: https://www.irs.gov/coronavirus/coronav ... -deadlines. The news release clearly lists Form 1065 under "Businesses" as being due on 7/15/2020.

However, as I now re-read IRS Notice 2020-23, it states that the automatic 3-month extension applies to 2019 returns due after 4/1/2020. The Form 1065 deadline is 3/15/2020. So it looks like the IRS news release and the IRS Notice conflict regarding the Form 1065 extended due date. Or maybe it's meant to only apply to a Form 1065 with a previously filed extension?

Any advice on whether the penalty is correctly assessed? If yes, any advice as to whether attaching the IRS news release (last updated 7/20/2020) with the incorrect 7/15/2020 due date for Form 1065 will be enough to have the IRS waive the penalty? Any other suggestions to help make my case to the IRS? Thanks.
Since the filing due date was 3/15, the penalty is probably correctly assessed, but there may be some relief available.

If the following conditions are met, the IRS will consider the late-filing as due to reasonable cause and fully-abate the penalty:

- 10 or fewer partners, and all US residents
- all partners filed their personal returns on time and reported all partnership items
- the partnership did not elect to be subject to the consolidated audit procedures

You should google Revenue Procedure 84-35 and "small partnership late penalty abatement" for more specific information on the requirements and the proper procedure for requesting the penalty abatement.
Thank you for your guidance! I researched the items you suggested and will draft a response to the IRS requesting a penalty abatement.

Re: Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Tue Jul 28, 2020 12:58 am
by neverpanic
HomeStretch wrote: Mon Jul 27, 2020 7:10 pm Thank you for your guidance! I researched the items you suggested and will draft a response to the IRS requesting a penalty abatement.
Do it while it's fresh in your mind is the only advice I can give here.

Re: Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Tue Jul 28, 2020 1:16 am
by Flora
Send the response by certified, return receipt mail.

Re: Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Tue Nov 10, 2020 9:01 am
by HomeStretch
Updating my thread with the final IRS outcome and to thank MarkNYC and other posters who responded:

I responded in writing in early August to the IRS notice requesting abatement under Revenue Procedure 84-35 as suggested by MarkNYC.

No response to my letter but I received a second IRS letter yesterday stating the IRS would seize business bank accounts to pay the penalty and interest.

I called the IRS. After a few transfers and a couple hours on hold, I connected with a very helpful IRS specialist. I provided my abatement-request letter information and certified mail # as she said my August response was in the backlog. She verified with their system that we met the conditions of RP 84-35 and fully abated the penalty. She mentioned that a lot of Form 1065 filers mistakenly believed the Form 1065 filing deadline was extended by IRS Notice 2020-23.

Re: Help with IRS Notice of Late Filing of Form 1065 for Tax year 2019

Posted: Tue Nov 10, 2020 9:39 am
by MarkNYC
Thanks for the update. I'm glad you were able to obtain a favorable resolution.