The formula
IRC 6698 imposes a penalty on a partnership that fails to file Form 1065 on time (with extensions) or files one that leaves out required information, for each month or part of a month the failure continues, up to 12 months. IRC 6699 does the same for an S corporation's Form 1120-S. The amount for each month is the base amount times the number of persons who were partners (or shareholders) at any time during the tax year. The statute's base is $195, adjusted for inflation each year; the IRS states the adjusted amount by the date the return was due without extensions (IRM 20.1.2.4.2 and 20.1.2.6.2). A month is counted the same way as for the IRC 6651(a)(1) penalty: it starts the day after the due date, including extensions, and ends on the matching day of the next month.
| Return due (without extension) in | Per partner or shareholder, per month | Source |
|---|---|---|
| 2018 | $200 | IRM 20.1.2.4.2; Rev. Proc. 2017-58 for 2019 |
| 2019 | $200 | Rev. Proc. 2017-58, sec. 3.49 |
| 2020 | $205 | Rev. Proc. 2018-57, sec. 3.55 |
| 2021 | $210 | Rev. Proc. 2019-44, sec. 3.55 |
| 2022 | $210 | Rev. Proc. 2020-45, sec. 3.55 |
| 2023 | $220 | Rev. Proc. 2021-45, sec. 3.55 |
| 2024 | $235 | Rev. Proc. 2022-38, sec. 3.55 |
| 2025 | $245 | Rev. Proc. 2023-34, sec. 3.56 |
| 2026 | $255 | Rev. Proc. 2024-40, sec. 3.56 |
| 2027 | $260 | Rev. Proc. 2025-32, sec. 3.55 |
So a three-partner Form 1065 for 2025, due in March 2026 and filed four months late, carries $255 x 3 x 4 = $3,060. The IRS failure-to-file penalty page describes the same multiplication and the cap of “up to 12 months.” The penalty also applies to the partnership adjustment tracking report a BBA partnership files after a push-out (Form 8985), because IRC 6698(a) covers that report as well.
Relief the IRS applies
First Time Abate. The FTA waiver covers the late-filing penalty under IRC 6698(a)(1) and 6699(a)(1), but not the incomplete-return penalty under (a)(2) (IRM 20.1.1.3.3.2.1). Run the facts through the FTA eligibility checker. IRM 20.1.2.4.3.1 tells employees: “Do not reject a penalty abatement request to obtain additional information if the partnership qualifies for "first time" abatement of the penalty.”
Rev. Proc. 84-35. Reasonable cause is presumed for a small partnership: 10 or fewer partners (spouses filing jointly count as one), each an individual other than a nonresident alien or a deceased partner's estate, items allocated in the same proportion to each partner, and every partner reporting its share on a timely return. The IRS reassesses if any criterion later turns out not to be met. See Rev. Proc. 84-35 relief.
Reasonable cause. Partnerships and S corporations that miss both can still ask for abatement on the facts; see the reasonable cause guide and the penalty abatement letter page. Deficiency procedures do not apply (IRC 6698(d)), so the remedy is administrative relief, Appeals, or paying and claiming a refund.
Interest. IRM 20.2.5.3 says the 6698 and 6699 penalties post as failure-to-file penalties “but interest does not start until the 23C date, even though the penalty posts with a TC 16X.” That is, interest runs from the assessment date.
The rules for each return are in the Form 1065 late-filing penalty and Form 1120-S late-filing penalty guides. The calculator was checked by hand against the formula above for 1, 3 and 12 months, for returns filed on the extended due date (no penalty), and for a return still unfiled more than a year later (12-month cap).
Questions practitioners ask
Who counts as a partner for the multiplier?
Every person who was a partner in the partnership at any time during the tax year (IRC 6698(b)(2)), and for an S corporation every person who was a shareholder at any time during the year (IRC 6699(b)(2)). The count is not the number at year end.
Which year's amount applies to a 2025 return filed in 2026?
The amount for the year the return was due without extensions. A calendar-year 2025 Form 1065 or 1120-S was due in March 2026, so the 2026 amount of $255 applies (Rev. Proc. 2024-40).
Does a valid extension change the calculation?
Yes. Months are counted from the extended due date, so a return filed on or before the extended date has no late-filing penalty. The per-month amount is still set by the original due date.
Can the incomplete-return penalty be removed with First Time Abate?
No. IRM 20.1.1.3.3.2.1 says FTA criteria are not met when the penalty is charged for an incomplete Form 1120-S or Form 1065 under IRC 6699(a)(2) or 6698(a)(2). Reasonable cause is the route for that penalty.