Penalty Relief for Certain Late Partnership Returns

Summary

Cross References - Notice 2017-47 The Surface Transportation Act of 2015 changed the due date for filing partnership returns for tax years beginning in 2016. Under the old rules, Form 1065, U.S. Return of Partnership Income, was due by the fifteenth day of the fourth month following the close of the taxable year (April 15 for calendar-year partnerships). Under the new rules, the due date is the fifteenth day of the third month following the close of the taxable year (March 15 for calendar-year partnerships). Partnerships are allowed an automatic six-month extension by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. The extension of time to file is granted if Form 7004 is filed by the due date for filing the partnership return. Partnerships that fail to file their return by the due date, or fail to file for an extension of time by the due date are subject to late filing penalties. In a recent notice, the IRS said that many partnerships filed their returns or Form 7004 by the old due date (April 18, 2017) for the 2016 tax year. If not for the new law, these returns and requests for extension of time to file would have been timely. As a result of this situation, the IRS is granting relief from the penalties for late filing for the first taxable year of any partnership that began after December 31, 2015, if the following conditions are satisfied: 1) The partnership filed Form 1065, 1065-B, 8804, 8805, 5471, or other return required to be filed with the IRS and furnished copies (or Schedules K-1) to the partners (as appropriate) by the date that would have been timely under IRC section 6072 before amendment by the Surface Transportation Act (April 18, 2017 for calendar-year taxpayers), or 2) The partnership filed Form 7004 to request an extension of time to file by the date that would have been timely under IRC section 6072 before amendment by the Surface Transportation Act and files the return with the IRS and furnishes copies (or Schedules K-1) to the partners (as appropriate) by the fifteenth day of the ninth month after the close of the partnership’s taxable year (September 15, 2017 for calendar-year taxpayers). Partnerships that qualify for relief and have already been assessed penalties can expect to receive a letter notifying them that the penalties have been abated. If the penalty has not been abated by February 28, 2018, call (800) 829-1040 and state that the taxpayer is entitled to relief under Notice 2017-47.