January 24, 2008
Ms. Linda Stiff
Internal Revenue Service
1111 Constitution Avenue, N.W.
RE: Due Date for Form 1065, Schedule K-1
Dear Acting Commissioner Stiff:
The American Institute of Certified Public Accountants appreciates the open and serious dialogue we have had with you on a range of issues over the last several months. In this regard, we are following up our previous discussion with you about the Form 1065, Schedule K-1 due date dilemma that has perplexed the clients of CPAs who prepare the Form 1040, 1065, 1120 and 1120S tax returns which include such K-1 information. While the AICPA believes that this issue might be addressed ultimately and more completely through legislative changes, a simple, regulatory change would quickly assist a significant percentage of taxpayers presently burdened by the late receipt of Schedules K-1. Accordingly, we recommend changing temp. reg. section 1.6081-2T, the automatic extension of time to file certain returns by partnerships; a temporary regulation that expires on November 4, 2008 as discussed below.
Under temp. reg. section 1.6081-2T, partnerships are generally allowed an automatic six month extension of time to file Form 1065, U.S. Partnership Return of Income, or Form 8804, Annual Return for Partnership Withholding Tax, as long as the partnership submits the appropriate form for extension. This regulation has, unfortunately, contributed to the problem of a large number of calendar year partnerships completing and sending Schedules K-1 to taxpayers just prior to or after the due dates of the partners’ tax returns. Receiving Schedules K-1 on October 13 or 14 makes it very difficult for tax preparers and taxpayers to complete their returns by October 15, in the case of an individual or other partnership tax return, and is impossible for corporate returns (both S and C) due September 15.
The AICPA is mindful and supportive of the IRS’s rationale for issuing final and temporary regulations in November 2005 regarding the automatic extension process for various types of tax returns. In doing this, the Service was attempting to (1) reduce taxpayer burden and confusion; (2) mitigate the complexity of the extension process then in place by allowing certain taxpayers to file a single extension as opposed to two separate extension requests; and (3) eliminate the need for taxpayers to sign or to provide an explanation as to the reasons for the extension request. We believe the automatic six month extension process is working very well for individual taxpayers in the completion of their Forms 1040. However, taxpayers that depend on the receipt of Schedules K-1 often have difficulty filing accurately even by the end of that six month final due date.
Accordingly, we recommend that the Service open a regulation project to: (1) address the difficulties taxpayers face when receiving delayed Schedules K-1 and (2) move the extended due date for partnership returns from October 15 to September 15, thus providing a maximum extension of five months.
The AICPA appreciates the opportunity to comment on the extension process for partnership returns (including Schedules K-1). We would be pleased to discuss the content of this letter with you at any time. If you have any questions, please contact me at email@example.com; Troy K. Lewis, Chair of the Partnership Technical Resource Panel, at firstname.lastname@example.org; Marc A. Hyman, AICPA Technical Manager, at email@example.com; or Benson S. Goldstein, AICPA Technical Manager, at firstname.lastname@example.org.
Jeffrey R. Hoops
Chair, Tax Executive Committee