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Thursday, September 04, 2008

EXTENSION PERIODS TO SHORTEN FOR PARTNERSHIPS, ESTATES & TRUSTS

Presently, partnerships, estates and trusts are generally obligated to file their income tax return by April 15, and can obtain 6 month extensions to October 15 (such dates are extended to the next business day if they fall on a weekend or federal holiday). These are the same dates that apply to individuals.

If you are an individual taxpayer on extension waiting for a Form K-1 from a partnership, estate or trust to complete your federal income tax return, it might not show up until you have to file the return, since the partnership, estate or trust doesn't have to complete its return until the same day that the individual taxpayer has to file its return.

The IRS has decided to help taxpayers with this problem. One way to resolve the problem would be to extend the individual 6 month extension period to give more time for taxpayers to receive the K-1 and finish their return. Surely, accountants would appreciate that type of relief.

Unfortunately, the IRS went the opposite direction, and SHORTENED the extension period for partnerships, estates and trusts from 6 months to 5 months. While this will help individual taxpayers, it will put more time pressure on tax preparers to complete the partnership, estate and trust returns.

No change is being made for S corporations, another entity that provides Forms K-1's. Since S corporations are required to file their returns on March 15, the existing six month extension already expires on September 15 - one month before the extension expiration for individual taxpayers.

These new rules will be effective for tax returns due in 2009 and thereafter.

IRS News Release IR-2008-84

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