underpayment penalty F.5805, annualized method - Spidell

underpayment penalty F.5805, annualized method

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Message Board underpayment penalty F.5805, annualized method

This topic contains 4 replies, has 2 voices, and was last updated by Cynthia Carnahan 5 months, 2 weeks ago.

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  • #164436
    Cynthia Carnahan
    Participant

    I am a CPA with 2 clients, an individual, and a trust, who each own an interest in a partnership with a tax year 2019 capital gain over $2million to each client. That income will be reported on Form 565, Schedule K-1 for each client. for purpose of the underpayment penalty Form 5805 annualized method, when is that partnership income considered earned? for example is it earned on the last day of tax year 2019?

    where can i find a citation for this please?

    [my understanding is that taxpayers reporting over $1million AGI must use the tax on their current tax year tax return to calculate the underpayment penalty.]

    thanks for all the folks out there that help with these thorny questions

  • #164532
    Gerald Weiss
    Participant

    For Federal 1040-ES not end of year rather each quartely date A partner must include his distributive share of partnership income (Sec. 702(a)), any guaranteed payments (Sec. 707(c)), and any gains or losses on partnership distributions that are treated as gains or losses on sales of property as of each installment due date (Regs. Sec. 1.6654-2(d)(2))

  • #164623
    Cynthia Carnahan
    Participant

    Sincere Thanks, Gerald. My follow up Q:

    Do you know of any exception for Limited partners, or limited LLC members, who do not receive any accounting data? the partnership CPA firm tells us he has been provided no information for tax year 2019 either.

    This is a small family partnership with an elderly managing partner, in ill health.
    [no viable succession plan]

    cynthia

  • #164660
    Gerald Weiss
    Participant

    CA conforms to IRC 6654 with RT&C 19361 modifing for percentages due at each installment date.

    Might check Operating Agreement to see what rights to partnership books and records a LP/LLC member has.

    Otherwise, it would be year end K-1 income times installment date percentages. 2018 Spidell blue book Chart 22-3 has 27%,63%,63%, and 90% as installment percentages when using annualized method.

     

  • #164672
    Cynthia Carnahan
    Participant

    okay, i owe you a BIG ONE, Gerald.

    Have a great week,
    cynthia
    [p.s.yes! the attorneys are circling all these partners overhead]