IRS Finalizes Automatic Five-Month Extension for Partnership, Trust and Estate Returns

Final regulations set the time for automatic extensions of partnership, trust and estate income tax returns at five months (TD 9531). Under this rule, the extended returns and Schedule K-1s for partners and beneficiaries will generally be due Sept. 15. The regulations also provide for an automatic six-month extension for pension excise tax returns.


In 2008, the IRS issued temporary and proposed regulations (TD 9407 and REG-1115457-08) reducing the extension for partnership, trust and estate returns to help individual taxpayers and their Form 1040 preparers to receive Schedule K-1s that report pass-through income from those sources in time to complete their individual returns by the regular six-month extended filing deadline.


Partnership returns subject to the automatic five-month extension under the final regulations are Form 1065, U.S. Partnership Return of Income, and Form 8804, Annual Return for Partnership Withholding Tax. Form 1065-B, U.S. Return of Income for Electing Large Partnerships, is eligible for an automatic six-month extension.


Most trusts and estates required to file Form 1041, U.S. Income Tax Return for Estates and Trusts, are also subject to the automatic five-month extension; however, bankruptcy estates required to file Form 1041, as well as filers of Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts, and Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts, will receive six-month, not five-month, extensions.


The final regulations also allow filers of Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code, to obtain an automatic six-month extension.


To receive an extension, the partnership, trust or estate must generally file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, and comply with other requirements.


Some commentators on the proposed regulations suggested that the IRS should change the original return due dates or lengthen the extension period for individual and corporate returns, but the return due dates are set by statute, and IRC § 6081 forbids extensions of more than six months, so the IRS could not make those changes in a regulation.


The AICPA had advocated for a Sept. 15 partnership extension due date for several years, while maintaining an Oct. 15 trust deadline. In January 2008, the AICPA wrote to the IRS, suggesting the Service open a regulation project to address the difficulties taxpayers face when receiving certain Schedule K-1s on or near their return due date. As a follow-up, in October 2010, the AICPA sent statutory recommendations to the chairmen and ranking members of the Senate Finance Committee and House Ways and Means Committee that resulted in the introduction of bills in both the House and Senate. The Senate bill was introduced first by Sen. Michael Enzi, R-Wyo., (S. 845) and the House bill by Rep. Lynn Jenkins, R-Kan. (HR 2382). Both bills are titled the Tax Return Due Date Simplification and Modernization Act of 2011. The act would set the return due date for partnership returns at March 15; S corporation returns at March 31; and trust, individual and C corporation returns at April 15 for calendar-year entities or the corresponding date after the end of the entity’s fiscal year. All these returns would generally be given a six-month extension from these dates, except for trust returns, which would be limited to a 5½-month extension.


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