Updated: Apr 6, 2020
If you forgot to file an extension, or the IRS lost it, or for some other reason your business tax return (LLC or partnership) is deemed as filed late by the IRS – then a steep penalty of around $200 per month per partner is assessed by the Feds.
Sorry for all the technical terms and all, but you may need to quote this specific information to the IRS now in order to get the penalty abated.
Tax advisers who work with small partnerships have long been aware of the late filing relief provided by Revenue Procedure 84-35. Under this provision a request for abatement must be made quoting the above named Rev Proc, and advising the IRS of the partners who filed timely tax returns.
However, recently in 2018 and 2019, the IRS has been taking a hard-nosed approach by simply denying the abatement of that penalty.
Some have wondered that since the procedure refers to a provision removed from the Internal Revenue Code by the Bipartisan Budget Act of 2015 for tax years beginning on or after January 1, 2018, is that the reason for the IRS’ denial, or is the abatement still available?
So here’s the good news that just came out in early 2020:
In Program Manager Technical Advice 2020-01, the Chief Counsel’s office (IRS) addressed that question, determining Revenue Procedure 84-35 still is available for taxpayers to use to obtain relief from partnership late filing penalties under IRC §6698.
The repeal of §6231 simply restored the law prior to TEFRA. But this relief had been mandated by Congress before the passage of TEFRA and Congress did not remove that relief as part of BBA 2015.
The above PMTA (Technical Advice from the IRS’ attorneys themselves) concludes:
A question was raised concerning how to interpret Revenue Procedure 84-35 now that section 6231(a)(1)(B) has been repealed and will be inapplicable to any partnership for which the relief provided in Revenue Procedure 84-35 is relevant. Significantly, the reference in Revenue Procedure 84-35 to IRC section 6231(a)(1)(B) is a reference to IRC section 6231(a)(1)(B) as it was in effect when Revenue Procedure 84-35 was originally issued. Thus, it is irrelevant that there does not exist any current section 6231(a)(1)(B) that is generally effective and applicable to partnerships seeking relief under Revenue Procedure 84-35. Moreover, the legislative history of section 6698, which is the basis for the relief provided in Revenue Procedure 84-35, is still relevant, and the scope of the section 6698 penalty for failure to file a partnership return has not been affected by the repeal of the TEFRA provisions. Thus, Revenue Procedure 84-35 is not obsolete and continues to apply.
So, yes, carry on and apply to the IRS for the abatement of the penalty for late filing of a partnership or LLC filing as a partnership. The penalty shall be abated for LLC’s or partnerships of 10 or fewer partners.