IRS permits certain partnerships to file superseding partnership returns

By Sally P. Schreiber, J.D.

To allow partnerships that may have made errors on their 2018 tax returns a chance to correct those errors, the IRS is granting certain partnerships a chance to file superseding 2018 tax returns (Rev. Proc. 2019-32). The relief applies to partnerships that had timely filed their Forms 1065, U.S. Return of Partnership Income, and Schedules K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., for the 2018 tax year (March 15 for calendar-year taxpayers) and did not elect out of the new centralized partnership audit regime. Such partnerships will now be allowed an extension of time to file superseding 2018 Forms 1065 and Schedules K-1 by Sept. 15, 2019.

The Bipartisan Budget Act of 2015 (BBA), P.L. 114-74, replaced the TEFRA partnership procedures with a centralized partnership audit regime that, in general, determines, assesses, and collects tax at the partnership level. Tax years of partnerships beginning in 2018 were the first tax years for which the centralized partnership audit regime was mandatory and the first tax years for which partnerships are prohibited from amending Schedules K-1 under Sec. 6031(b). A number of partnerships have filed for extensions of time to file their 2018 returns and may file an original or superseding return by the extended due date of Sept. 15.

Many other partnerships have filed their returns on time for the 2018 tax year but may have made errors, including not properly reporting all of the required information on Schedules K-1. These BBA partnerships, having timely filed, did not request an extension of the deadline to file and, due to the restrictions on amending Schedules K-1 under Sec. 6031(b), may not amend the Schedules K-1, including for the 2018 tax year. The ability of the partners of such BBA partnerships to amend their own returns for the 2018 tax year is not affected by the restrictions under Sec. 6031(b); however, if the partner is a BBA partnership, the restrictions under Sec. 6031(b) may apply.

To be eligible for relief under this procedure, the partnership must (1) not have elected the application of Sec. 6221(b) (the election out of the BBA); (2) have timely filed Form 1065; and (3) have timely furnished all Schedules K-1 required to be furnished (without regard to the extensions of time provided in the relief).

Under the relief, the IRS will treat the timely filing of Form 1065 by an eligible partnership as a timely and appropriately filed request for a six-month extension of the deadline to file the Form 1065. Thus, an eligible partnership may file a superseding Form 1065 and furnish corresponding Schedules K-1 before the expiration of the extended deadline.

To take advantage of this relief, eligible partnerships should file their superseding returns on or before six months after the due date and include the following statement at the top of the superseding Form 1065: “SUPERSEDING FORM 1065 PURSUANT TO REVENUE PROCEDURE 2019-32.”

The relief applies only to partnership tax years that ended prior to the issuance of the revenue procedure and for which the extended due date for that partnership tax year is after July 25, 2019.

— Sally Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.

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