Change in Length of Extensions for Some Entity Returns

The extensions for partnerships (Form 1065 series) and trusts and estates (Form 1041) will be valid for only five (5) months (previously this was six months) starting with returns which have unextended due dates on or after January 1, 2009.

As you know Congress has set various deadlines for the filing of income tax returns including the April 15th deadline for individuals, partnerships, and trusts.

IRS has granted taxpayers the right to file extensions which give taxpayers more time, typically a maximum of 6 months either automatically or some period automatically followed by an additional amount if there is a valid reason. Over the past few years IRS has changed some of the extensions, such as giving partnerships a flat automatic 6 months instead of the former automatic 3 months followed by up to 3 more months if the partnership had a valid reason.

One of the difficulties individual taxpayers have had is getting the information from pass through entities, in particular partnerships, estates, and trusts, in time to complete their individual income tax returns.

On June 24, 2008 IRS changed the extension time periods for some returns. TD 9407 contains the regulations that made these changes. As stated above partnerships (Form 1065 series) and trusts and estates (Form 1041 series) now have a five (5) month extension limitation (previously this was six months). This brings the extended due date for calendar year Forms 1065 & 1041 to September 15th, the same date as corporations. The extension time remains at six (6) months for partnerships which keep their records and books of account outside the United States and Puerto Rico.

The changes are effective for income tax returns with unextended due dates of January 1, 2009 or later. This means calendar year 2008 returns are subject to the new extension time frames.

(This regulation is really effective for all returns due on or after July 1, 2008, but there is a provision in the regulation that says taxpayers can delay its effective date to returns due after on or after January 1, 2009.)

The extension time limit for corporation returns did not change. Since they have unextended due dates of March 15th, their 6-month extensions bring their extended due dates to September 15th, which is still one month prior to the extended due dates for calendar year individual income tax returns.

Some of the comments received from tax professionals suggested changing the due dates for the income tax returns of partnerships, trusts, and estates to the 15th day of the 3rd month (March 15th for calendar year entities) instead of the current 15th day of the 4th month. IRS cannot make this change since these unextended due dates are set by Congress. IRS can only change the length of time for which extensions apply.

A copy of these regulations can be found by going to www.irs.gov/pub/ and clicking on irs-reg and then clicking on TD 9407.

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