Taxpayers who were affected by the recent service outage when Wolters Kluwer took many of its applications offline have gotten relief from the IRS for certain May 15 filing deadlines. The IRS issued a statement on Tuesday, telling taxpayers who file after the May 15 deadline (and do not file for an extension) to include the statement “Late filed return due to CCH Software Outage” on their return as a statement of reasonable cause for their late filing. Sec. 6651, which imposes a penalty on taxpayers for failure to file a return or pay tax, allows for waiver of the penalty if it is shown that failure is due to “reasonable cause and not due to willful neglect” (Sec. 6651(a)).
Tax returns potentially affected by this waiver include Forms 990, Return of Organization Exempt from Tax; 1120, U.S. Corporation Income Tax Return; 1120S, U.S. Income Tax Return for an S Corporation; and 1065, U.S. Return of Partnership Income, for some calendar year and fiscal year filers.
For e-filed Forms 990, taxpayers should include the text, “Late filed return due to CCH Software outage,” in the ReasonableCauseStatement element of the electronic file. For e-filed Forms 1120, 1120S, and 1065, taxpayers should include that text in the SpecialConditionDesc element of the electronic file.
For paper returns, the taxpayer should attach a separate written statement to the signed tax return, titled “Reasonable Cause Waiver Request - IRC 6651, Failure to File Penalty.” The statement should contain the text, “Late filed return due to CCH Software outage” and must be attached to the original signed return.
Wolters Kluwer had told customers on Monday that the IRS had approved the extension, saying that the extension period is one week — until May 22, 2019. However, Tuesday’s IRS announcement does not limit the period to one week.
The IRS encouraged taxpayers with May 15 deadlines to file on time, if possible, or to file for an extension.
Wolters Kluwer took several of its applications offline last week after discovering malware in its platforms. (See “Wolters Kluwer Takes Services Offline After Malware Attack.”) Various CCH, ATX, and Taxwise branded tax products were affected.
— Alistair M. Nevius, J.D., (Alistair.Nevius@aicpa-cima.com) is JofA’s editor-in-chief, tax.