IRS Notice Provides Penalty Relief to Certain Partnership Return Filing Taxpayers

by Monte L. Schatz

The IRS has issued Notice 2017-47 that provides penalty relief to partnerships that filed certain untimely returns or untimely requests for extension of time who filed those returns for the first taxable year that began after December 31, 2015.

Section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Surface Transportation Act), Public Law 114–41, 129 Stat. 443 (2015), amended section 6072 of the Internal Revenue Code (the Code) and changed the date by which a partnership must file its annual return. The due date for filing the annual return of a partnership changed from the fifteenth day of the fourth month following the close of the taxable year (April 15 for calendar-year -2- taxpayers) to the fifteenth day of the third month following the close of the taxable year (March 15 for calendar-year taxpayers). The new due date applies to the returns of partnerships for taxable years beginning after December 31, 2015.

Many partnerships failed to timely file their various partnership returns (1065, 1065-B, 8804, 8805 or 7004 Extension requests for any of the other various partnership returns).  The assumption of these taxpayers was that the normal deadlines for their 2016 Partnership returns applied (namely April 18, 2017 for the actual returns and September 15, 2017 for those that filed the Form 7004 extension for any of these returns).    Normally in these circumstances the taxpayer is subject to late filing penalties; however, the new filing deadlines shortening the return filing period by one month resulted in many taxpayers filing late returns and the IRS has provided relief for those late filed returns.

The IRS in Notice 2017-47 has announced relief will be granted automatically for penalties for failure to timely file Forms 1065, 1065-B, 8804, 8805, and any other returns, such as Form 5471, for which the due date is tied to the due date of Form 1065 or Form 1065-B. Partnerships that qualify for relief and have already been assessed penalties can expect to receive a letter within the next several months notifying them that the penalties have been abated.  For reconsideration of a penalty covered by this notice that has not been abated by February 28, 2018, contact the number listed in the letter that notified you of the penalty or call (800) 829-1040 and state that you are entitled to relief under Notice 2017-47.

SOURCE: IRS Guidewire Issue Number N-2017-47

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LLC Owned by Married Couple Generally Not Treated as Disregarded Entity

If an LLC is owned solely by a married couple who file their taxes jointly, the question may arise whether the husband and wife can be counted as one member allowing the company to be treated as a disregarded entity?  This would be beneficial because it would eliminate the need for separate federal and state tax returns for the company.  While there are instances where a husband and wife are counted as one (i.e. in S-corporations), this rule is not applicable towards Nebraska LLC’s.  An LLC solely owned by a married couple will by default be taxed as a partnership and the company will be required to file separate federal and state income tax returns.

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