Do I Need to File a 1065 With No Income?
Understand the IRS filing requirements for partnerships with no income. While exceptions exist, the default rule often applies, even with zero activity.
A partnership is a business structure involving two or more individuals who agree to carry on a business. For tax purposes, these entities use Form 1065, U.S. Return of Partnership Income, to report their financial activity to the Internal Revenue Service (IRS). This form is an informational return, so the partnership itself does not pay tax on its income. Instead, profits and losses are “passed through” to the partners, who report them on their personal tax returns. This raises the question of whether a partnership with no income or expenses must still file Form 1065.
The General Filing Requirement for Partnerships
The IRS requires nearly every domestic partnership to file an annual information return. A domestic partnership is one that is created or organized in the United States or under the law of the United States or any state. This filing obligation exists to report income, gains, losses, deductions, and credits from the partnership’s operations and applies to general partnerships, limited partnerships, and LLCs treated as partnerships for tax purposes.
The requirement to file is not tied to profitability, as a partnership must file Form 1065 even if it operated at a net loss for the year. The return is due by the 15th day of the third month after the end of the partnership’s tax year. For most calendar-year partnerships, this deadline is March 15.
Exceptions to the Filing Requirement
An exception relieves certain partnerships from the annual filing duty. A domestic partnership is not required to file Form 1065 if it neither receives any income nor incurs any expenses that would qualify for deductions or credits during the tax year. This applies only to partnerships that were completely dormant financially. If the partnership earned even a small amount of interest income or paid a minor expense like a bank fee, it would be required to file a return.
Revenue Procedure 84-35 provides another exception for certain small partnerships. To qualify, the partnership must meet several conditions:
- It must have 10 or fewer partners for the entire year, and all partners must be individuals, C corporations, or estates of deceased partners.
- All partners must have reported their share of partnership items on their timely filed income tax returns.
- All items of income, deduction, and credit must be allocated proportionally to each partner’s ownership interest.
If the partnership agreement specifies special allocations, such as one partner receiving a different percentage of losses than their share of profits, this exception cannot be used.
Penalties for Failure to File
Failing to file Form 1065 when required can lead to penalties, even if the partnership had no taxable income to pass through to its partners. The penalty is assessed for late filing or for failing to provide all required information on the return. The IRS can impose this penalty for each month, or part of a month, that the return is late, calculated by multiplying a set monthly amount by the number of partners.
For tax returns due in 2025, the penalty is $235 per partner for each month the return is late, up to a maximum of 12 months. For example, a partnership with five partners that files its return six months late could face a penalty of $7,050 ($235 x 5 partners x 6 months). This penalty is assessed against the partnership itself and is separate from any tax liabilities the individual partners may have. The penalty applies unless the partnership can show that the failure to file was due to reasonable cause.
How to Complete a Zero-Income Form 1065
If a partnership does not qualify for an exception and must file, completing a zero-income Form 1065 is straightforward. You must start by entering the partnership’s basic information at the top of the form, including its legal name, address, and Employer Identification Number (EIN). It is also important to check any boxes that apply, such as indicating if it is an “initial return” or a “final return.”
On the main body of Form 1065, enter “0” on the lines for total income and total deductions. The form must be signed and dated by a partner, as an unsigned return is not considered valid and can result in failure-to-file penalties.
Even with zero income, the partnership must issue a Schedule K-1 to each person who was a partner during the year. This schedule reports each partner’s individual share of the partnership’s financial items. For a zero-income return, the Schedule K-1s will show zeros for all income, loss, deduction, and credit categories. This provides each partner with the official documentation needed for their personal tax records.