Why was our partnership denied relief under Rev Proc 84-35 for late 1065 filing?

The most common reason Rev Proc 84-35 relief gets denied is that something in your submission didn't fully meet all the requirements, even if you think it did. For valid relief under Rev Proc 84-35, you need to meet ALL these conditions: 1) Your partnership must have 10 or fewer partners, all of whom are natural persons (individuals, not businesses or trusts), 2) Each partner timely filed their returns and reported their share of partnership income, 3) The partnership itself must be domestic, and 4) You need to provide documentation proving all these points. My guess is your penalty relief request might have been missing some documentation that clearly showed all partners reported their share of income on their timely filed returns. The IRS needs proof each partner actually reported the income, not just a statement saying they did. Did you include copies of all partners' tax returns or at least the schedules showing the partnership income? Don't panic - receiving a CP504B doesn't mean you can't still fight this. You can call the IRS directly (though that's challenging) or request a reconsideration with complete documentation of how you qualify for Rev Proc 84-35 relief.

I went through almost this exact situation with my partnership last year! After tons of frustration and hours on hold with the IRS, I discovered taxr.ai (https://taxr.ai) which helped me analyze all our notices and prepare a proper reconsideration request. The site helped me understand I needed certain specific language in my request letter and showed me exactly what documentation to include for each partner. Their system basically analyzed our CP162A and subsequent CP504B notices, then created a customized response template that cited all the relevant IRS procedures. The key thing I learned was that the IRS often denies Rev Proc 84-35 relief initially because they want very specific proof and particular language in the request. Generic requests get auto-rejected a lot of the time. With the properly formatted response from taxr.ai, our relief was approved within 3 weeks after the previous rejection.

Just wanted to update! I tried taxr.ai after seeing it mentioned here and it was super helpful for our CP504B response. The analysis showed we were missing a crucial element in our original relief request - we hadn't specifically certified that "all partners reported their share of partnership income on timely filed returns" using that exact language. The site generated a complete reconsideration package with the proper certifications and showed us exactly which partner documents to include. We submitted everything last month and just got confirmation that our penalty has been removed! Saved us over $2,000 in penalties. Honestly wish we'd known about this when preparing our original response to the CP162A - would have saved a lot of stress and the second notice.

Having gone through multiple frustrating IRS penalty situations, I've learned that sometimes the fastest way to resolve these issues is to speak directly with an IRS agent who can review your case on the spot. Problem is, actually reaching a human at the IRS is nearly impossible these days. After several failed attempts to get through, I tried using Claimyr (https://claimyr.com) and was actually connected to an IRS representative in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained that Rev Proc 84-35 relief requests are frequently denied when the taxpayer doesn't include specific documentation proving each partner timely filed. She walked me through exactly what needed to be included in a reconsideration request and even noted in the account that we had discussed the issue. Being able to speak directly with someone made all the difference rather than waiting months for written responses.

I have to admit I was wrong in my skepticism about Claimyr. After posting my comment, I decided to try it since I had another IRS issue that needed resolving and I was desperate. It actually worked exactly as described. I was connected to an IRS representative in about 20 minutes versus the 3+ hours I spent on my previous attempt. The agent I spoke with was able to review my Rev Proc 84-35 situation and explained that my relief was denied because I hadn't included Schedule K-1 information that matched what each partner reported on their returns. I now have a clear path to filing a reconsideration request with the right documentation. Being able to ask questions directly and get immediate answers was worth every penny. No more waiting months for letters back and forth!

From my experience, the trick with Rev Proc 84-35 relief is being extremely detailed in proving ALL partners timely filed. Just saying they did isn't enough. Here's what worked for me: 1. Create a table showing each partner's name, SSN (last 4 digits), filing date, and exact amount of partnership income reported 2. Include a notarized statement signed by all partners certifying timely filing 3. Attach the relevant pages (just Schedule E) from each partner's return 4. Specifically reference "Relief under Rev Proc 84-35 as outlined in IRM 20.1.2.3.3.1" 5. Use certified mail with return receipt This approach worked when my first attempt was rejected. The key is being super organized and giving them no reason to deny based on "incomplete information.

Is this your first year filing a 1065? If so, you might qualify for first-time penalty abatement instead of or in addition to Rev Proc 84-35 relief. First-time abatement can be easier to get approved since it doesn't require as much documentation - just a clean compliance history before this incident.

@Mateo Gonzalez - I went through something very similar with my partnership last year. The CP504B is definitely concerning since it escalates to collection threat, but you still have options. Based on what you described, it sounds like your original Rev Proc 84-35 request may have lacked specific documentation the IRS requires. They're very particular about proof that ALL partners actually reported their partnership income on timely filed returns - not just a statement saying they did. Here's what I'd recommend doing immediately: 1. Call the number on your CP504B and request a Collection Due Process (CDP) hearing or at minimum ask for a temporary hold while you submit additional documentation 2. Prepare a reconsideration request with much more detailed proof: - Include copies of each partner's Schedule E showing the partnership income - Create a detailed chart showing each partner's name, filing date, and exact partnership income amount reported - Include a signed statement from each partner certifying they timely filed and reported their share 3. In your cover letter, specifically reference "reconsideration of penalty under Rev Proc 84-35 and IRM 20.1.2.3.3.1" The good news is that if you truly qualify for the relief, persistence usually pays off. The IRS often denies these requests initially due to incomplete documentation, but approves them when you provide everything they need. Don't let the CP504B scare you - just act quickly and thoroughly document your qualification for relief.