Extensions Reduced to Five Months for Pass-through Entities

Pass-through entities, such as partnerships and fiduciaries (trusts and estates), pass their income, deductions, credits, etc. through to their investors, partners or beneficiaries, who in turn report the various items on their individual tax returns. Partnerships file Form 1065 and fiduciaries file Form 1041, with each partner or beneficiary receiving a Schedule K-1 from the entity that shows their share of the reportable items.

Prior to this change, all of the aforementioned entities could obtain an automatic extension to file their returns for the same length of time allowed to individuals. This made it difficult for individuals to meet the filing deadline without estimating the pass-though information and then later filing an amended return when the actual data was received.

o Five-Month Automatic Extension - As a result the IRS has decided to reduce the automatic extension period for pass-through entities from six to five months, thus providing individual taxpayers with a month’s grace period to complete their individual returns.

o Effective Date - This change will generally become effective for extension requests with respect to calendar year tax returns due on or after January 1, 2009. However, this change also applies to fiscal year partnerships (1065), estate and trust tax returns (1041), and Form 8804 with a tax year ending on or after September 30, 2008.

This neither changes the process for requesting an extension of time to file nor affects extensions of time to file for other types of business returns, such as those used by S corporations.

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