The IRS is allowing partnerships subject to the centralized audit provisions in the Bipartisan Budget Act of 2015 (BBA), P.L. 114-74, to file an amended partnership return for 2018 or 2019 to take advantage of beneficial tax provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116- 136. The IRS announced in Rev. Proc 2020-23 that BBA partnerships, which are normally prohibited from filing an amended return after they have filed Form 1065, U.S. Return of Partnership Income, and provided Schedules K-1, Partner’s Share of Income, Deductions, Credits, etc., to their partners, may file an amended partnership return for 2018 or 2019 to take advantage of the CARES Act provisions that were enacted to provide relief from the economic effects of the coronavirus pandemic.
According to the IRS, it is providing retroactive tax relief that affects partnerships, including relief for the tax years ending in 2018 and 2019. Unless they have the option to file amended returns, BBA partnerships that already filed their Forms 1065 for the affected years generally will be unable to take advantage of the CARES Act relief for partnerships except by filing administrative adjustment requests (AARs) under Sec. 6227. If a partnership filed an AAR, the partners would only be able to receive any benefits from that relief on the current tax year’s federal income tax return, meaning the partners generally would not be able to take advantage of CARES Act benefits from an AAR until they file their current-year returns, which could be in 2021. The CARES Act, however, is intended to provide an immediate benefit to taxpayers.
Under the revenue procedure, BBA partnerships that filed a Form 1065 and furnished all required Schedules K-1, Partner’s Share of Income, Deductions, Credits, etc., for the tax years beginning in 2018 or 2019 before this revenue procedure was issued may file amended partnership returns and furnish corresponding Schedules K-1 before Sept. 30, 2020. The amended returns may take into account tax changes brought about by the CARES Act as well as any other tax attributes to which the partnership is entitled by law. This relief is only available to BBA partnerships that already filed their returns, and the amended return replaces any previously filed return including any AAR.
A BBA partnership must file a Form 1065 (with the “Amended Return” box checked) and furnish corresponding amended Schedules K-1 to its partners. When filing, the BBA partnership should write “Filed pursuant to Rev. Proc. 2020-23” at the top of the amended return and attach a statement with each Schedule K-1 sent to the partners with the same notation. Although the IRS said partnerships can file by mail or electronically, filing electronically will speed the process.
Partnerships currently under IRS examination should notify the revenue agent and furnish a copy of the amended returns and Schedules K-1 to the agent. If a BBA partnership has filed an AAR for a year that it is amending, it should use the figures on the AAR when filing the amended return.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.
— Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.