The IRS has issued procedures for eligible partnerships to file amended income tax returns and partners’ Schedule K-1s in order to receive tax benefits. Partnerships subject to the centralized partnership audit regime (BBA partnerships) that filed Form 1065 and gave partners’ Schedule K-1s for tax years beginning in 2018, 2019, or 2020 can file amended returns before October 15, 2021. Generally, BBA partnerships are prohibited from filing an amended return and are required to file an Administrative Adjustment Request (AAR).
Under the post-2017 audit regime provided by the Bipartisan Budget Act of 2015 (BBA), the IRS will audit all partnerships (domestic or foreign) and their partners and assess all taxes and penalties resulting from a partnership audit at the partnership level, unless the partnership has 100 or fewer qualifying partners and elects to opt out of the new audit regime. Specifically, under the new centralized partnership audit regime, the IRS will examine partnership-related items at the partnership level and make adjustments at the partnership level. A partnership-related item is any item or amount with respect to the partnership that is relevant in determining the income tax liability, including any imputed underpayment, interest, and penalties of any person.
This guidance allows BBA partnerships the option to file an amended return to accelerate certain tax benefits. A BBA partnership that files an amended return pursuant to this guidance is still subject to the centralized partnership audit procedures enacted by the BBA. An eligible BBA partnership may use amended returns to change its method of depreciation and/or general asset account treatment for its residential rental property or make a late election to be an electing real property trade or business.
Under this procedure, BBA partnerships have the option to amend their partnership tax return if they satisfy the eligibility requirements below for the applicable tax year beginning in 2018, 2019, or 2020:
- have not elected out of the BBA partnership audit regime;
- have timely filed Form 1065, U.S. Return of Partnership Income and required Schedules K-1; and
- timely file an amended return and schedules by October 15, 2021.
Please call the Crosslin tax team at (615)320-5500 to review your partnership return to determine if you qualify to amend your 2018, 2019 or 2020 tax return to apply for certain tax benefits. We are here to help!