IRS Shortens Filing Extension Deadline for Some Entities

By Alistair M. Nevius, J.D.

At the end of June, the IRS announced that it was changing the extended due date for certain returns from six months to five months (T.D. 9407; REG-115457-08). This was done to solve a problem some individual taxpayers have been having in which they receive timely Schedules K-1 on October 15 (or shortly before), leaving them no time to adequately prepare their personal returns.

The new rules affect entities that file Form 1065, U.S. Return of Partnership Income, Form 1041, U.S. Income Tax Return for Estates and Trusts, or Form 8804, Annual Return for Partnership Withholding Tax (Section 1446). In tax years ending after September 30, 2008, such entities will only be able to extend the due date for such returns by five months. In most cases, this will mean that they must furnish Schedules K-1 to individuals one month before the Form 1040 extended due date of October 15.

Because Form 1120-S, U.S. Income Tax Return for an S Corporation, generally already has an extended due date of September 15, S corporations are not affected by the new rules.

Automatic extensions: The regulations also provide simplified procedures for taxpayers to obtain automatic extensions of time to file certain returns and remove the signature requirement and the requirement for an explanation of the need for the extension.

Individuals will now be granted an automatic six-month extension, as long as they file Form 4868, Application for Automatic Extension of Time to File a U.S. Individual Income Tax Return. Until now, individuals could receive only a four-month automatic extension and then had to apply for a discretionary two-month extension, using Form 2688, Application for Additional Extension of Time to File U.S. Individual Income Tax Return. With the increase in the automatic extension to six months, the IRS has eliminated Form 2688.

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