Late partnership and S corp returns: how the penalty is worked out

Partnerships and S corporations rarely owe tax themselves, which leads many owners to treat their return deadline casually. The penalty for filing late does not depend on tax at all. This guide shows how it is calculated and how to get it removed.

By Awais Jameel, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. Checked against official sources on . 2 minute read.

Short answer

A late Form 1065 or 1120-S costs a flat amount for each owner for each month or part of a month late, up to 12 months: $255 for returns due in 2026 and $260 for returns due in 2027. It applies even when no tax is owed. Relief is available through first-time abatement, reasonable cause, or, for small partnerships, a long-standing IRS procedure.

At a glance

Formula
Amount x owners x months late, up to 12 months
Returns due in 2026
$255 per owner per month
Returns due in 2027
$260 per owner per month
Applies with no tax owed
Yes
First-time abatement
Available for the late filing penalty
Small partnerships
Relief for 10 or fewer partners meeting conditions
Late partnership and S corp returns: how the penalty is worked outSteps: 1. File immediately; 2. Send the K-1s; 3. Request relief.THE PROCESS AT A GLANCELate partnership and S corp returns: how thepenalty is worked out1File immediatelyEach extra month adds another month'spenalty for every owner2Send the K-1sOwners need them for their own returns3Request reliefFirst-time abatement if eligible, smallpartnership relief if it fits, otherwisereasonable causeChecked against official sourcesTax BakersLate partnership and S corp returns: how the penalty is worked outSteps: 1. File immediately; 2. Send the K-1s; 3. Request relief.THE PROCESS AT A GLANCELate partnership and S corpreturns: how the penalty is workedout1File immediatelyEach extra month adds another month'spenalty for every owner2Send the K-1sOwners need them for their own returns3Request reliefFirst-time abatement if eligible, smallpartnership relief if it fits, otherwisereasonable causeChecked against official sourcesTax Bakers
The process at a glance: 1. File immediately; 2. Send the K-1s; 3. Request relief.

How is the penalty calculated?

The penalty for a late partnership return (Form 1065) and a late S corporation return (Form 1120-S) is a set dollar amount, multiplied by the number of people who were partners or shareholders at any time during the year, multiplied by the number of months or part-months the return is late, up to 12. The dollar amount is adjusted for inflation each year: $255 for returns due in 2026 and $260 for returns due in 2027.

The same penalty applies to a return filed on time but incomplete, for example with Schedules K-1 missing.

What does it add up to?

Situation, return due in 2027CalculationPenalty
Two-member LLC, 1 day late$260 x 2 x 1$520
Two-member LLC, 4 months late$260 x 2 x 4$2,080
S corporation with 3 shareholders, 6 months late$260 x 3 x 6$4,680
Partnership with 5 partners, over a year late$260 x 5 x 12$15,600

A return is late from the original due date unless a valid extension was filed in time. For calendar-year businesses, that is March 15, 2027, or September 15, 2027 with Form 7004.

How can the penalty be removed?

First-time abatement

The IRS's first-time abatement policy covers the late filing penalty on partnership and S corporation returns. It generally applies if the business had no penalties in the previous three years and has filed all required returns. It does not cover the separate penalty for filing an incomplete return. Ask for it by phone, in writing or with Form 843 once the return is filed.

Small partnership relief

A long-standing IRS procedure treats certain small partnerships as having reasonable cause. The conditions are, broadly: 10 or fewer partners; each partner an individual who is not a nonresident alien, a C corporation or a deceased partner's estate; every partner's share of every item the same; and every partner having reported their share on a timely filed return. There is no equivalent for S corporations.

Reasonable cause

Events outside your control, such as serious illness, a disaster or records being unavailable, combined with prompt action once the obstacle ended. Explain the facts and dates in writing with evidence.

What should you do if the return is already late?

  1. File immediately

    Each extra month adds another month's penalty for every owner.

  2. Send the K-1s

    Owners need them for their own returns.

  3. Request relief

    First-time abatement if eligible, small partnership relief if it fits, otherwise reasonable cause.

How the other penalties work, including interest, is in late filing and late payment penalties.

Received a late filing penalty?

We check the calculation, request first-time abatement or small partnership relief, and prepare any reasonable cause statement.

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Questions people ask

What is the penalty for filing Form 1065 late?

$255 per partner per month for returns due in 2026, and $260 for returns due in 2027, for up to 12 months.

Is there a penalty if the partnership owed no tax?

Yes. The penalty is per owner per month and does not depend on tax owed.

Does first-time abatement apply to late Form 1065 or 1120-S penalties?

Yes, for the late filing penalty, if the business had a clean three-year record. It does not apply to the penalty for an incomplete return.

What is small partnership relief?

An IRS procedure that treats partnerships with 10 or fewer qualifying partners as having reasonable cause, if every partner reported their share on a timely return.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IRS: Penalty handling memorandum SBSE-04-0625-0025 on IRC 6698 and 6699 and first-time abatement (June 2025)
  2. IRS Revenue Procedure 2025-32: penalty amounts for returns required to be filed in 2027
  3. Internal Revenue Code sections 6698 and 6699
  4. IRS Revenue Procedure 84-35: small partnership relief
  5. IRS: Form 843, Claim for Refund and Request for Abatement

Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.

Deadlines, penalties and IRS noticesLate filing and late payment penalties explainedFederal tax formsForm 1065: the partnership returnFederal tax formsForm 1120-S: the S corporation return

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This guide is general information. It is not tax or legal advice for your situation.