Missed filing Form 1065 for my small LLC - how to file late and avoid huge penalties?

7 Thanks for the info! Does "reasonable cause" actually work though? Like, will saying "I didn't know about this form" actually get me out of penalties or will the IRS just laugh at that? Also, if my personal tax return already included all the business income (I reported everything on Schedule C), do I still need to amend my personal return after filing the 1065?

13 "I didn't know" by itself typically isn't sufficient for reasonable cause, but being a first-time business owner who made a genuine effort to comply with other tax obligations can strengthen your case. Detail the steps you took to understand your filing requirements and why you missed this specific form. If you reported the LLC income on Schedule C of your personal return, you definitely need to amend your personal return after filing Form 1065. LLC partnership income should be reported on Schedule E based on your K-1, not Schedule C. Schedule C is for sole proprietorships, not partnerships, so the IRS will see this as an incorrect filing method once they receive your 1065.

9 Does it really work for penalty abatement though? I'm in a similar situation and I'm worried about spending money on a service if the IRS is just going to charge me penalties anyway.

22 I'm confused about how this works. Does this replace having to go to an accountant? I'm just worried about giving my tax info to some random website.

5 For penalty abatement, it absolutely worked in my case. The service doesn't guarantee removal of all penalties, but it helps you craft the strongest possible case based on your specific situation and IRS precedent. In my case, I got 100% of the penalties removed as a first-time business filer. It doesn't completely replace an accountant, but it can save you hundreds in accountant fees. The service uses bank-level encryption and doesn't store your documents after analysis. It's more like getting expert guidance on exactly what forms you need and how to file them correctly, along with templates for penalty abatement letters tailored to your situation.

8 Wait, how does this even work? Is this legal? Seems sketchy that some third party service can somehow get you through to the IRS faster.

12 I'm highly doubtful this actually works. The IRS phone system is notoriously terrible. How could some random service possibly get you through when the IRS itself can't manage their call volume?

16 It's 100% legal - they're just using automated technology to wait on hold instead of you doing it yourself. They don't interact with the IRS at all - when an agent picks up, they connect you directly to that agent. It's like having someone physically sit with your phone on speaker while on hold, then calling you when it's answered. The service doesn't get you through any faster than normal - I still had to wait in the IRS queue. The difference is I didn't have to sit there actively listening to hold music for hours. I just got a call when an agent was actually on the line. For my situation with the late 1065, getting direct guidance from the IRS was really valuable since they could see my filing history and confirm I qualified for first-time penalty abatement.

11 Do you remember how exactly you got the 2023 form? When I go on the IRS website it's super confusing with all the different versions and I can't tell which is the right one.

3 You need to go to IRS.gov and search specifically for "Form 1065 2023" (or whatever tax year you need). The direct link should be something like irs.gov/pub/irs-pdf/f1065.pdf but with the year in the URL. Look at the top right corner of the form - it should clearly state the tax year. The easiest approach might be to use tax software instead of paper forms - even if you're filing late, software like TurboTax Business or TaxAct will have the correct year's forms and will guide you through the process step by step to make sure you're completing everything correctly.

13 The First-Time Penalty Abatement policy typically only works once, for your first penalty. For multiple years, you'll need stronger reasonable cause arguments. Consider getting professional help from a tax attorney, as multiple years of non-filing creates a more complex situation with potentially larger penalties.

This is really helpful, thank you! Just to clarify - when you say "Request First-Time Penalty Abatement when you file" - is that something I check on the actual 1065 form, or do I need to send a separate letter? And do I need to wait until I get a penalty notice from the IRS before I can request abatement, or can I be proactive about it? Also, quick question about the amended return - if my LLC had losses this year (which it did), will amending from Schedule C to Schedule E actually help or hurt my tax situation? I'm worried about making things worse!

You can be proactive about penalty abatement - don't wait for a penalty notice! When you file your late 1065, attach a separate letter requesting First-Time Penalty Abatement (there's no checkbox on the form itself). In your letter, reference IRC Section 6651(a) and explain this is your first penalty for failure to file a partnership return. Regarding your amended return with LLC losses - this could actually work in your favor! On Schedule C, losses are subject to at-risk and passive activity limitations. With Schedule E (partnership losses), the treatment might be more favorable depending on your level of participation in the LLC. The losses will still flow through to offset other income, but the classification and limitations may change. Since you have losses, there's less urgency on the amended return (no additional tax owed), but you should still file it to correct the record and ensure proper loss treatment. The IRS will eventually match your 1065 to your personal return and notice the discrepancy anyway. Pro tip: Keep detailed records of all the steps you're taking to correct this situation - it strengthens your reasonable cause argument and shows good faith effort to comply.

This is such a great point about state requirements - I completely forgot about those! Quick question though - if I'm filing late for federal, should I wait to file the state partnership return until after I submit the 1065, or can I do both at the same time? I'm in California and I know they can be pretty strict about penalties. Also, you mentioned Form 8832 - since I never filed one and the IRS defaults to partnership status anyway, do I need to worry about filing that now or can I just proceed with the 1065? I don't want to create more complications than I already have!

You can file both federal and state at the same time - no need to wait! In fact, it's better to get both done ASAP since California's penalties are steep ($18 per partner per month for late filing). California Form 565 is their partnership return. Regarding Form 8832, you don't need to file it now since you're already defaulting to partnership status. Filing it at this point would just create unnecessary paperwork. The IRS automatically treats multi-member LLCs as partnerships for tax purposes unless you elect otherwise, so you're good to proceed directly with the 1065. One California-specific tip: they have their own reasonable cause criteria that's sometimes more restrictive than federal. When you file your late CA return, mention that you're a first-time business filer AND that you're correcting the issue at the same time as your federal filing. California tends to be more forgiving when they see you're addressing both simultaneously rather than just fixing one. Also, make sure your California return matches your federal 1065 exactly - any discrepancies will likely trigger correspondence from the Franchise Tax Board asking for explanations.

This is really reassuring, thank you! I was definitely spiraling about the penalty amounts. One quick question about the reasonable cause statement - should I write this as a separate letter that I include with my 1065 filing, or is there a specific form I need to use? Also, when you mention being "proactive" with the penalty abatement request, do you mean I should submit it at the same time as the 1065, or should I wait to see if the IRS actually assesses penalties first? I've seen conflicting advice on this and want to make sure I handle it the right way from the start. Really appreciate everyone's help in this thread - as a first-time business owner, this community has been a lifesaver!