Partnerships (Multi-Member LLCs) - Form 1065: U.S. Return of Partnership Income

What Is It About?

This relates to multi-member LLCs and partnerships, which must file Form 1065 with the IRS to report their income, deductions, and other financial details.

• Partnerships and multi-member LLCs don’t pay income tax directly; instead, income is passed through to the partners, who report it on their personal tax returns.

• Failure to file or errors in reporting can result in significant penalties, including fines and even criminal charges for intentional violations.

Penalties:

• Failure to File the Form – $235 per partner, per month (up to a maximum of 12 months).

• Incorrect or Incomplete Information – Up to $280 per error.

• Willful Noncompliance – Up to 5 years in prison and a fine of $250,000 for individuals or $500,000 for corporations (26 USC § 7201).