Short answer
On July 8, 2026, the IRS announced an Automatic Exemption from Penalty that requires no request. If you have a clean compliance history for the prior three years, the penalty is not assessed in the first place, rather than assessed and then removed. It covers failure to file, failure to pay, and failure to deposit. The failure-to-file category includes the partnership and S corporation late filing penalties. It does not cover Form 5472, where the penalty is 25,000 dollars and foreign-owned single-member LLCs are the ones who file it.
Key takeaways
- The IRS announced the Automatic Exemption from Penalty on July 8, 2026. No request, no letter, no phone call. Eligible taxpayers simply do not get the penalty assessed, and it takes over fully for returns originally due on or after January 1, 2027.
- The partnership late filing penalty is charged per partner, per month, whether or not the LLC owes a dollar of tax. For returns required to be filed in 2026 it is 255 dollars per partner per month, up to twelve months.
- The small partnership relief in Revenue Procedure 84-35 is still alive, confirmed by IRS Chief Counsel. But every partner has to be a natural person other than a non-resident alien, or the estate of one, which writes most foreign-owned multi-member LLCs out of that route.
- Form 5472 sits outside the automatic exemption. The penalty is 25,000 dollars, and another 25,000 accrues for each 30-day period once the failure continues more than 90 days after the IRS notifies you. That clock starts with a letter, and the letter goes to your last known address.
- A notice sent to your last known address is legally effective even if you never receive it. That address is the one on your most recently filed return, not the one on your website.
Before you start
- Find out how your LLC files. A single-member LLC owned by a US person, a multi-member partnership, an S corporation, and a foreign-owned single-member LLC face different penalty regimes, and the relief programs do not reach all of them equally.
- Check what address is on the last return you filed. Not the address in your state formation record, and not the one on your invoices. That is the one the IRS will use.
Who this is for
- Multi-member LLCs that missed a Form 1065 deadline and are looking at a penalty that has nothing to do with how much tax they owe.
- Foreign founders of US LLCs, who are in the one group the new automatic relief does not reach.
On July 8, 2026, the IRS did something quietly useful. It announced that first-time penalty relief no longer has to be requested. The agency calls it the Automatic Exemption from Penalty, and its own language is unusually direct: taxpayers do not need to take action to receive this relief.
This replaces First-Time Abate, the program that has been the standard answer to a late filing penalty for years, and which required you to know it existed, call the IRS, and ask. That was always a program for people with good advisors. The new one is not. The automatic process takes over fully for returns originally due on or after January 1, 2027.
So most of the advice written about LLC late filing penalties, including most of what comes up first, is describing a process that is being retired. But there is a more useful thing to say than good news. Two groups still fall through, and if you are reading this on a site about US business addresses, there is a decent chance you are in one of them. They fall through in different directions, which is worth keeping straight: one is shut out of the older small partnership relief, the other is shut out of the new automatic exemption itself.
First, the Penalty Nobody Expects
The multi-member LLC penalty catches people because it is not a tax penalty in the way they imagine. It is not a percentage of what you owe. Under Internal Revenue Code section 6698, the late filing penalty for a partnership return is a flat amount, per partner, per month, and it applies whether or not the partnership owes any tax at all.
| Amount | |
|---|---|
| Per partner, per month, for returns required to be filed in 2026 | 255 dollars |
| Per partner, per month, for returns required to be filed in 2027 | 260 dollars |
| Maximum months charged | 12 |
| Applies when the LLC owes no tax | Yes. The penalty is not calculated from tax due |
| Three partners, four months late, 2026 | 3 × 255 × 4, which is 3,060 dollars |
Figures from Revenue Procedure 2024-40 and 2025-32. The S corporation penalty under section 6699 works the same way.
Watch the indexing, because this is where published figures diverge. The amount is set by the year the return is required to be filed, not the tax year it covers. A tax year 2025 Form 1065, due in March 2026, uses the figure for returns required to be filed in 2026, which is 255 dollars. Lower amounts in older articles are earlier filing years, not a different rule.
A two-member LLC that made no money, filed nothing because there was nothing to report, and got around to it five months later is looking at 2,550 dollars. That is the call people make in a slightly panicked voice, and it is the reason the relief programs matter.
What the Automatic Exemption Actually Covers
The eligibility test is the same one First-Time Abate used, which is the clearest signal of what the IRS is doing here. It is not loosening the standard. It is removing the requirement that you ask. Which is worth pausing on, because the people who never knew to ask were never the people with a tax attorney on retainer.
- A clean compliance history for the prior three years, meaning the same type of return filed on time with no penalties. For quarterly filers the look-back is twelve quarters.
- The three penalty types the IRS lists for both programs are failure to file, failure to pay, and failure to deposit. Its penalty relief guidance includes the partnership and S corporation late filing penalties, sections 6698 and 6699, in the failure-to-file category.
- Nothing to submit. Under First-Time Abate, the penalty was assessed and then removed on request. Under the automatic exemption, no penalty assessment is made.
One honest caveat, because this announcement is new and precision matters more than confidence here. The IRS release does not enumerate every form. What it says is that the same three penalty categories apply, and the failure-to-file category has always included the partnership and S corporation returns. If your situation turns on this, that is a question for a CPA, not for an article written in the program's first weeks.
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The Group That Gets Written Out: Foreign Partners
There is a second relief route, older and narrower, for small partnerships. Revenue Procedure 84-35 excuses the late filing penalty for a partnership of ten or fewer partners where everyone reported their share on their own timely return. It was widely believed to have died when the old partnership audit rules were repealed. It did not. IRS Chief Counsel addressed this directly: the revenue procedure is not obsolete and continues to apply. The current IRS page explaining the CP162A notice still lays out its conditions.
Read those conditions closely, though, because one of them is doing quiet work. The IRS states that each partner during the tax year was a natural person other than a non-resident alien, or the estate of a natural person.
One non-resident alien partner disqualifies the entire partnership from Revenue Procedure 84-35 relief. Not their share of it. The whole filing. A US-formed LLC with two founders, one in Seoul and one in Austin, does not have this safety net, and almost nothing written about small partnership relief mentions it.
That is not a technicality at the edge of the rules. It is a large and growing category of company: a Delaware or Wyoming LLC, two or three founders, at least one of them outside the United States. They file the same Form 1065, they face the same 255 dollars per partner per month, and the relief that was built for small partnerships was drafted for a domestic membership and still reads that way.
The Group That Gets Written Out Twice: Form 5472
If a foreign person owns your single-member LLC, you file a pro forma Form 1120 with a Form 5472 attached, and this is where the numbers stop being merely annoying.
- The penalty for failing to file Form 5472 when due is 25,000 dollars.
- If the failure continues more than 90 days after the IRS notifies you, an additional 25,000 dollars applies for each 30-day period after that.
- Form 5472 is excluded from the automatic exemption and was excluded from First-Time Abate. The IRS treats it as an information return tied to specific events, and those sit outside both programs.
Look at the second item again. The 30-day clock that multiplies a 25,000 dollar penalty does not start when you make the mistake. It starts 90 days after the IRS notifies you. Which raises a question almost nobody asks about penalty relief: notifies you where?
Where the Notice Lands, and Why That Is the Whole Game
It is tempting to draw a straight line here and say that a bad address causes a late filing. It does not, and the honest version is more interesting anyway. Your filing deadline is set by statute, not by a reminder in the mail. Form 1065 is due on the fifteenth day of the third month after the tax year ends, and it is due whether or not anything arrives in your mailbox. The CP162A notice does not warn you that a return is coming. It tells you, after the fact, that one was late.
So the address does not create the penalty. It decides what happens next, and next is where the money is. Here is the rule, in the IRS's own words, from Revenue Procedure 2010-16: when a notice or document is sent to a taxpayer's last known address, it is legally effective even if the taxpayer never receives it.
| What people assume | What the rule says |
|---|---|
| The IRS knows where I am because my state filing says so | Your last known address is the address on your most recently filed and processed return. Not your formation record, not your website. |
| If I never got the letter, the clock never started | The notice is legally effective even if you never receive it. The clock started. |
| I updated my address, so I am covered | It takes about 45 days for a change to be properly processed. Notices sent in that window go to the old address. |
| I put the new address on my letterhead | A new address in the letterhead of correspondence does not by itself change your address of record. |
| Nobody has changed my address but me | A change-of-address filed with the USPS can update the IRS address of record through the postal service's national database. |
From Revenue Procedure 2010-16 and Treasury Regulation section 301.6212-2.
Now put the two halves together. The CP162A notice is not merely news. It is the thing you reply to in order to claim small partnership relief, because the IRS asks you to respond to that notice with a signed statement. Miss the notice and you miss the cheapest relief route available to you. Further down the road, the collection notices carry a 30-day window to request a Collection Due Process hearing, and those notices go to the last known address on exactly the same terms.
And for a foreign-owned single-member LLC, the notification that starts the 30-day multiplier on a 25,000 dollar Form 5472 penalty is a letter. Sent to the last known address. Effective whether or not you are standing there to receive it.
This is the part of the compliance stack that founders abroad tend to hold together with an apartment that changes every year, or a friend who forwards things when they remember. The IRS has an address for your LLC whether or not you chose it deliberately. save office gives you one you did choose: a real street address in one of seven US cities, active within 24 hours, with mail scanned and forwarded wherever you actually are. Use Form 8822-B to tell the IRS about a business address change, and give the change time to land before you need it to work, because the notice you cannot afford to miss will not wait for your paperwork to catch up.
Not tax advice. Penalty amounts adjust annually and the automatic exemption was announced on July 8, 2026, so details may develop. Confirm your own situation with a CPA, particularly if a Form 5472 obligation is in play.
Frequently Asked Questions
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Published July 12, 2026
I'm Henry, a hedgehog in a bow tie who explains the dull, scary parts of building and running a U.S. business.
