By: Tamara Pow
Since I started my career as a tax attorney at Price Waterhouse, and have been managing partner at two San Jose law firm limited liability partnerships (LLPs) since then, I am used to being in control of the tax reporting for my business. This is also one of the tasks that falls to me at home thanks to a natural division of labor with my scientist husband who would rather clean the garage than spend a day doing tax forms. I like to have my taxes filed by the original due dates. I find that extending the returns just creates more accounting fees, and more issues during the year when I need to provide returns for various reasons. However, oftentimes when you are a partner in a partnership that you don’t control, you will not get partnership form K-1s for that partnership until just days or hours before the April 15 th deadline. As a result, it may be too late to get into the queue for your accounting firm to get your personal returns done before the deadline and you will have to extend your personal taxes.
Beginning after 2015, the IRS has changed business tax return filing deadlines to supposedly alleviate this problem. Partnership returns will now be due 2 ½ months after year end (March 15 for calendar year partnerships). This is the same as the S corporation deadline. This gives partners time to get their Form K-1s and give them to their personal accountants to transfer the information to their Form 1040s in time for April 15 th . C corporations, which are not flow through tax entities like S corporations and partnerships, will be due 3 ½ months after year end (April 15 for calendar year corporations). Partnerships will be able to extend for six months, still making the partnership returns due a month before the extended due date for personal tax returns. (Source: The Kiplinger Tax Letter , Vol. 90, No. 17, August 14, 2015.)
Keep in mind that many LLC operating agreements and LP and LLP partnership agreements may need to be updated to take these new deadlines into account and to put managers, managing members and general partners on notice that they have earlier tax deadlines to meet, and should therefore provide tax information to the partners earlier. If that does not happen, we may see the opposite effect – a lot more partnership tax return extensions, resulting in more personal tax return extensions.
The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.
For more partnership tax information, see: https://www.irs.gov/businesses/small-businesses-&-self-employed/partnerships