IRS Expands Penalty Relief for Late-Filed Forms 1065 (Notice 2017-71)

The IRS has expanded penalty relief for entities required to file partnership returns. These entities include partnerships, REMICS, banks with common trust funds, and religious or apostolic associations/corporations. The IRS will treat the acts of any entity that may properly file a Form 1065, and in fact filed a Form 1065, as timely if the entity acted by the old due date. Thus, a 2016 Form 1065, filed by a calendar-year entity after March 15, 2017, but on or before April 18, 2017, will be considered timely filed. However, the entity will still be liable for any interest due from the earlier due date.

Late-Filed Forms 1065

The due date for partnership returns was changed by the Surface Transportation Act (P.L. 114-41). The new due date, March 15 for calendar-year taxpayers, is a month earlier than the old date. The new due date applies to tax years beginning after December 31, 2015. Many entities required to file partnership returns filed their returns or took other actions by the old due date. If not for the Surface Transportation Act, these returns and other acts would have been timely.

Penalty Abatement

An entity that has already been assessed a penalty for failure to timely file a return that is deemed timely under the new guidance will receive a notice that the penalty was abated within the next several months. For other acts deemed timely, such as elections, an entity should file its returns as if the election was timely filed. The entity does not need to take any further action unless contacted by the IRS.

If an entity does not receive an abatement notice by February 28, 2018, it should contact the IRS at the number in the notice. Taxpayers qualifying for this relief will not be treated as having received a first-time abatement under the IRS’s administrative penalty waiver program.

Notice 2017-47, I.R.B. 2017-38, 232, is amplified, clarified and superseded.

Notice 2017-71

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CCHTaxGroup

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