IRS Grants Penalty Relief to Partnerships Filing Late Returns

The IRS recently issued guidance, Notice 2017-47, providing penalty relief for partnerships that were late in filing certain returns or extension requests. The relief applies to the first tax year that began after December 31, 2015.  If the returns or extension requests were filed after the new due date of March 15 but on or before April 15, 2017, Notice 2017-47 eliminates late filing penalties if certain conditions are met.

Background

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the due dates that a partnership must file its annual return.  For calendar year partnerships, the due date for filing an annual return or request for an extension changed from April 15 to March 15.  But many partnerships had filed their returns or extension requests for tax year 2016 by the April deadline.  If not for the Surface Transportation Act, the returns and extension requests would have been made on time.

Conditions for Penalty Relief 

Penalty relief will be granted if one of the following two conditions is met:

• The partnership filed the returns (Forms 1065, 1065-B, 8804, 8805, 5471 or other returns) with the IRS and furnished copies (or Schedules K-1) to the partners (as appropriate) by the date that would have been timely prior to the Surface Transportation Act amendment (for calendar-year taxpayers, April 18, 2017)
• The partnership filed Form 7004 to request a filing extension by the date that would have been timely before the Surface Transportation Act amendment 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 tax year (for calendar-year partnerships, that date is September 15, 2017).

Automatic Penalty Abatement

Partnerships do not have to take action to obtain this relief. If a penalty has not yet been assessed, relief will be automatically granted by the IRS. If the penalty has already been assessed, the taxpayer will receive a letter within the next several months notifying them that the penalties have been abated.  For reconsideration of a penalty covered by the Notice that has not been abated by February 28, 2018, taxpayers should contact the number listed in the penalty letter or call (800) 829-1040, advising that they are entitled to penalty relief under Notice 2017-47.

Also, any taxpayer qualifying for relief under the Notice will not be treated as having received a first time abatement under the IRS’s administrative penalty waiver program.

What Does CohnReznick Think?

Partnerships should determine if the penalty relief granted in Notice 2017-47 applies to them.  If you have received a penalty notice eligible for abatement under Notice 2017-47, do not pay the penalty. Instead, wait for notification from the IRS that your penalties have been abated.  

Contact

For more information, please contact:

Brian Newman, CPA, Partner, Practice Leader, Federal Tax Services

959.200.7009