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IRS reduces extension period for filing partnership, estate and trust returns

The IRS has issued new regulations that, starting immediately with the 2009 filing season, will reduce from six months to five months the filing extension allowed for partnerships, estates and trusts. Shortening by one month to September 15 the time allowed for calendar-year partnerships, estate and trusts to file their returns on extension will ease the problem that has bedeviled individuals on six-month extensions waiting for their Schedule K-1 information from these entities.

"We are eliminating the same-day deadline for these returns, which causes needless hardship and puts the individual taxpayer in an awkward position," IRS Commissioner Douglas Shulman said. "We want to correct this timing issue to ensure that all taxpayers have the information they need to file timely and stay in compliance with the law." S corps remain on a six-month extension and are not impacted by the new regs since their extension brings their filing deadline to September 15, already one month in advance of individuals on extension.

In 2005, the IRS announced that all extensions for individuals residing in the U.S. will automatically last for six months. Individuals no longer have to file one form for an automatic four-month extension and a second form for an additional two-month discretionary extension. The extension was immediately problematic. An individual with a six-month extension of time to October 15 to file Form 1040 may not receive a Schedule K-1 from a partnership until after the partnership files its Form 1065 on its extended due date of October 15.

Now, the IRS has reduced the six-month extension to five months for partnerships filing Form 1065, U.S. Partnership Return of Income, or Form 8804, Annual Return for Partnership Withholding Tax. The extension is also reduced from six to five months for estates and trusts filing Form 1041, U.S. Income Tax Return for Estates and Trusts.

The five-month extension is effective for returns due on or after January 1, 2009.