How much is the penalty for filing Form 1065 late?
There is no single number we can honestly quote before looking at the year, because the exposure on this filing is charged by reference to the form and the length of the delay rather than to the tax. That is the structural point: the charge is not a percentage of a balance owing, so it does not shrink to nothing because the partnership had a quiet year. What we do first is establish how many years are outstanding and for how long, because that, not the partnership's profit, is what drives the arithmetic and what filing now stops from growing.
Our partnership owed no tax, so why is there a penalty?
Because the charge attaches to the return, not to the bill. A partnership pays no tax of its own in any event, so a rule that only bit when tax was outstanding would never reach a partnership return at all. The return's purpose is informational: it tells every partner, and every tax authority those partners file with, what share of what income belongs to them. A missing return leaves all of that undecided, which is the harm being charged for. It is why an unfiled year with no tax in it can still be expensive, and why nil years are worth filing promptly.
Does the penalty keep growing while the return is unfiled?
Treat it as growing with the delay until the return is in. Since the exposure is measured by the form and by how long it has been outstanding, every further period of delay is a further period being charged for, and nothing about the partnership's results interrupts that. It has one practical consequence worth acting on: filing an imperfect but honest return now is almost always better than holding it back for a figure that is still being argued about. Where a figure genuinely cannot be settled, we file on a stated basis and set out in the papers what remains open.
Can a late filing penalty be cancelled if we had a reason?
There is a relief route that turns on the reason for the delay, and it is worth taking seriously rather than treating as a formality. What it rewards is a specific, dated account of what happened — which records were unavailable, when they arrived, who was told what and when — supported by documents. What it does not reward is a general statement that the partnership was busy or that the rules are complicated. We usually build that account while preparing the outstanding returns, because the facts are in front of us then and reconstructing them a year later is much harder.
Our partners cannot finish their own returns, so what comes first?
The partnership return comes first, because it is what decides each partner's share. Until it exists, a partner abroad is either filing on an estimate they will have to amend or holding their own return open and taking on their own lateness in their own country. That is the hidden cost of a late partnership return: it is one late filing that turns into several, each on a different timetable. Where a partner is under real pressure at home, we prepare their allocation figures as the partnership return is finalised so their filing can move the moment ours does.
We have several unfiled partnership years, so do we file them all?
Yes, and in order. Each year's allocations open the next year's balances, so filing the most recent year on its own leaves it resting on figures no return supports, and any later examination starts by asking where those figures came from. We work the years forward from the last filed one, keep the allocation method consistent unless something in the agreement changed, and note the points where it did. Filing the set together also lets one account of the delay cover all of the years, rather than each year being explained separately.
Does a remote employee create a permanent establishment?
It can. One employee working from home in another country may be enough where the arrangement gives the company a fixed place at its disposal, or where that person habitually concludes contracts. Seniority and function matter more than headcount: a salesperson closing deals is a far greater risk than a developer. The exposure is corporate tax and payroll registration in that country, which is why it is worth testing before the hire rather than after. See PE risk review.
How is a GILTI inclusion calculated, in outline?
Start at the foreign company: its tested income or loss for the year, computed under US principles. Aggregate those across all your controlled foreign corporations, net the losses, then reduce by a return on qualifying tangible business assets less certain interest expense. What remains is your inclusion, brought into your own return, where the deduction and any credit are applied. Every one of those percentages has been amended, so the mechanism is stable and the arithmetic is year-specific. See the GILTI inclusion and Form 8992.
