IRC § 6698 provides that partnership late filing penalties will not apply if it is "shown that such failure is due to reasonable cause." In other words, after the partnership receives a notice from the Internal Revenue Service for trying to rectify past mistakes, the partnership may make a case to eliminate these penalties. While "reasonable cause" is usually predicated on the facts and circumstances of the case, the Internal Revenue Service has a long-standing procedure whereby small partnerships will be granted relief from IRC § 6698 penalties, without specific factual showings. Reasonable cause elements are listed in Rev. Proc. 84-35, 1984-1 C.B. 509.
IRS’s also has a first-time abatement (FTA) penalty waiver described here:
Despite being widely available, FTA is one of the most overlooked penalty abatement options. According to a study by the Treasury Inspector General for Tax Administration, 92% of penalties that qualified for FTA weren’t abated because taxpayers were unaware of the FTA option. FTA is the easiest of all penalty relief options.
If you need to call the IRS, the number is listed at http://www.ustaxservices.ca/. TIP: call early (opens 6am) or late (closes 11pm) to avoid hour-long wait.
To successfully present a reasonable-cause argument for late filing, a taxpayer must demonstrate that he or she exercised ordinary business care and prudence but couldn’t comply. The taxpayer must also demonstrate that the noncompliance was not due to willful neglect.