Penalty relief for partnerships that filed late returns in 2017
The IRS has issued guidance providing penalty relief for certain partnerships that did not file the required returns by the new due date for tax years beginning in 2016. (IR-2017-141; Notice 2017-47)
Under the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, for calendar-year partnerships, the due date for filing the annual return or request for an extension changed from April 15 (April 18 in 2017) to March 15.
Many partnerships filed their returns or their extension requests for tax year 2016 by the April deadline, and if not for the due date changes, these returns and requests for extension of time to file would have been on time.
Notice 2017-47 provides penalty abatement for these partnerships, provided:
- The partnership filed the returns with the IRS and furnished copies to the recipients (as appropriate) by the date that would have been timely; or
- The partnership filed Form 7004 to request an extension of time to file by the date that would have been timely.
The IRS will grant relief 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 (April 17, 2017, for calendar year partnerships).
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.
If the penalty has not been abated by February 28, 2018, contact the IRS at 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.
Taxpayers who qualify for relief under this notice will not be treated as having received a first-time abatement under the IRS's administrative penalty waiver program. This is particularly helpful, as the first-time abatement may only be used once.
Note: Earlier this summer, Governor Brown signed AB 119, which allows the FTB to grant an automatic seven-month extension period to file partnership returns (including LLCs taxed as partnerships), effective for returns filed for the 2017 tax year. Under AB 119, the FTB may presume reasonable cause if a taxpayer doesn't comply with the September 15, 2017, extended filing due date for 2016 returns.