Wednesday, July 02, 2008

Noncorporate Business Extension Period Sliced by IRS

The Internal Revenue Service announced that the automatic extension for noncorporate, nonindividual tax returns such as Partnership (1065), Trust and Estate (1041) and Partnership Withholding Tax (8814) would be shortened to five months. In most cases, this means that the return would be due on September 15 of each year. The change applies to returns due after the end of the 2008 calendar year with a fiscal year ending September 30, 2008 or later. IRS Commissioner Doug Shulman emphasized the needs of recipients of partnership, trust and estate income to receive their K-1s in time for the October 15 extension deadline for most indivdiuals.

I guess I have mixed emotions about this decision. Shulman's advantages to trust, etc. income recipients are legitimate; at the same time, this could become problematic for preparers who have balky partnership or estate clients. Furthermore, the change to September 15 seems to be of limited administrative advantage to the IRS, since third quarter estimated payments traditionally come due on that date. Finally, trust, estate and partnerships are placed at a disadvantage compared to corporate or individual taxpayers, having only a five-month extension opportunity versus six months. While the IRS can make a case for this ruling, small tax practitioners and bank trust departments cannot be faulted if they are unhappy with the change.


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