Automatic Filing Extension for Partnership, Trusts and Estate Tax Returns Reduced

Automatic Filing Extension for Partnership, Trusts and Estate Tax Returns Due After 2008 Reduced from Six to Five Months (IR-2008-84; T.D. 9407; NPRM REG-115457-08)

The IRS has issued proposed, final and temporary regulations relating to simplification procedures for obtaining automatic extensions of time to file returns. The final regulations adopt temporary regulations previously issued in T.D. 9229 without significant change.

The newly issued temporary regulations, however, revise certain of the previously issued temporary regulations by reducing, from six months to five months, the automatic extension period for partnerships filing Form 1065, U.S. Partnership Return of Income, or Form 8804, Annual Return for Partnership Withholding Tax, and estates and trusts filing Form 1041, U.S. Income Tax Return for Estates and Trusts.

For example, in the case of a calendar-year partnership, Form 1065 will need to be filed by September 15, rather than October 15. This change should enable individual taxpayers to obtain the Schedule K-1 information necessary to complete their returns by their October 15 six-month extended due date. This one-month reduction in the six-month extension period is effective for returns due on or after January 1, 2009. The six-month extension period for partnerships that file Forms 1065 or Form 8804 and trusts and estates that file Form 1041 will continue to apply to returns required to be filed before January 1, 2009.

CCH Comment. Under the current rules, a calendar-year S corporation with a six-month extension is already required to file its return by October 15 since the unextended due date for Form 1120-S is March 15. Thus, S corporations will continue to receive an automatic six-month extension period.

The final regulations adopt without change the earlier issued temporary regulations that provided an automatic six-month extension for individual returns if a timely, completed application for extension is filed on Form 4868, Application for Automatic Extension of Time To File a U.S. Individual Income Tax Return. Under the rules in effect prior to issuance of T.D. 9229, an individual could obtain an initial automatic four-month extension by filing Form 4868 and apply for an additional two-month discretionary extension by filing Form 2688, Application for Additional Extension of Time To File U.S. Individual Income Tax Return.

CCH Comment. A commentator suggested that the elimination of Form 2688 adds an administrative burden on individual taxpayers living abroad who may qualify for an extension beyond six months. The IRS, however, will not retain Form 2688. Taxpayers living abroad will need to file a letter containing the information required by Reg. §1.6081-1(b) that was formerly provided on Form 2688.

With respect to corporate filing extensions, the final regulations now explicitly state that the requirement to list with an extension request the name and address of each member of an affiliated group has the effect of granting an extension for each member's separate return in the event that the member does not file as part of the consolidated group.

The final regulations also adopt without change temporary regulations that: (1) provide an automatic six-month extension to file certain excise, income, information and other returns by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns; (2) allow administrators and sponsors of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) to report information concerning the plans and direct entities to obtain an automatic two-and-one-half-month extension of time to file by using Form 5558, Application for Extension of Time To File Certain Employee Plan Returns; and (3) allow donors who do not request an extension of time to file an income tax return to request an automatic six-month extension of time to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, by filing Form 8892, Payment of Gift/GST Tax and/or Application for Extension of Time to File Form 709.

The text of the temporary regulations serves as the text of proposed regulations set forth in NPRM REG-115457-08. Written or electronic comments and requests for a public hearing must be received by September 28, 2008.

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Stephen Martinez

IRS May Have Goofed on 385,000 Stimulus Payments

Washington, D.C. (June 23, 2008)
By WebCPA staff

Calculations of economic stimulus payments by the Internal Revenue Service may have been wrong in nearly 400,000 cases.

Treasury Inspector General for Tax Administration J. Russell George said in testimony before the House Ways and Means Oversight Subcommittee that as of June 13, the IRS had issued approximately 76.5 million stimulus payments totaling approximately $63.9 billion. His office has determined that the IRS correctly calculated the stimulus payment for 99.6 percent of the returns.

However, TIGTA identified approximately 385,000 stimulus payments in which its calculation did not agree with the IRS's. The differences in some cases resulted from programming that did not include all qualified self-employment income and losses in the determination of eligibility. As of May 30, 2008, TIGTA had identified approximately 25,000 returns for which the stimulus payment was not allowed.

"In these cases, TIGTA believes that taxpayers were entitled to an additional $16.5 million," said George. "These errors affected clergy and other individuals whose income is not subject to the self-employment tax."

Many taxpayers did not receive the child portion of the stimulus payment because they did not check the Child Tax Credit qualifying box on the tax return. When TIGTA raised this concern, the IRS initially responded that it could not allow the child portion of the stimulus payment in these instances because eligibility for the Child Tax Credit could not be determined from the information on the tax return.

The IRS subsequently announced that it would issue the additional child portion of the stimulus payment to approximately 350,000 households in July. TIGTA is in the process of quantifying the number of individuals that might be affected

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Stephen Martinez