Early in July 2008 the Internal Revenue Service announced a change in the extended due date for certain business returns. The purpose of the change is to ease the tax filing crunch that affects many individual taxpayers. The new regulations reduce the extension period from six to five months, providing additional time for taxpayers who must report information from Schedules K-1 (and similar documents) on their individual tax returns.

An IRS Schedule K-1 (and similar documents) reflects items of income, deduction and credit from partnerships, S corporations, estates and trusts that are required to be reported to partners, investors and beneficiaries. The individuals then reflect that information on their personal tax returns.

Old Law

Under prior regulations, the extended due dates for both businesses and individuals often fell on the same date, generally October 15. This created a burden for individual taxpayers to accurately report the information reflected on Schedule K-1 (and other similar statements) and timely file their personal tax returns.

As noted by the IRS, eliminating the same-day deadline for pass-through returns, which created needless hardship and put the individual taxpayer in an awkward position, will help to ensure that all taxpayers have the information they need to file timely and stay in compliance with the law.

New Law

The recently issued temporary and proposed regulations will reduce the extension of time to file tax returns for certain businesses from six months down to five. Requiring these statements to be issued one month earlier, generally by September 15, will provide individuals whose extended tax returns are due by October 15 additional time to prepare and file their returns by that extended due date.

The abbreviated extension request period is effective with respect to extension requests for tax returns due on or after January 1, 2009, and applies to business entities that have a tax year ending on or after September 30, 2008, that file the following returns and forms:

  • Form 1065, U.S. Return of Partnership Income
  • Form 1041, U.S. Income Tax Return for Estates & Trusts
  • Form 8804, Annual Return for Partnership Withholding Tax (Section 1446)

For calendar-year entities, each of these forms has a regular, non-extended due date of April 15. Therefore, the extended due date under the new regulations will be September 15 instead of October 15. Under the previous regulations, a partner in a calendar-year partnership who has an extended due date of October 15, 2009, for his individual 2008 tax return might not receive his 2008 Schedule K-1 from the partnership (assuming the partnership return had also been extended) until as late as October 15, 2009. Under the change, he would receive his 2008 Schedule K-1 from the partnership no later than September 15, 2009, as much as a full month earlier.

It is important to note that the regulation does not change the process for requesting an extension of time to file, nor does it affect extensions of time to file other types of business returns, such as those used by S corporations. A calendar-year S corporation's extended due date remains September 15, since S corporations have a return due date of March 15 and, under a regular six-month extension of time to file, their extended due date falls on September 15.

The IRS initiated the proposal to reduce the extension of time to file for the returns noted, including in its analysis the impact of the change on partnerships and other affected entities compared with the burden the previous deadline put on individuals.