Correction to Penalty Relief for Missing Negative Tax Basis Capital Account Information


negative tax basis capital account information

 

The IRS has corrected Notice 2019-20, which provided a waiver of penalties under Internal Revenue Code (IRC) Sections 6722 (failure to furnish correct payee statements) and 6698 (failure to file partnership return) for certain partnerships that file and furnish Schedules K-1 to Form 1065 without reporting negative tax basis capital account information. The updated Notice extends the penalty waiver to Code Sections 6038(b) and (c) and any other section of the Code, for partnerships that fail to file and furnish Schedules K-1 or any other form or statement to Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, and for any penalty that arises solely as a result of failing to include negative tax basis capital account information. The penalty relief applies only for tax years beginning after December 31, 2017, but before January 1, 2019.

The IRS will waive the penalty only if both of the following conditions are met:

  • The partner Schedules K-1 are timely filed (including extensions) with the IRS, timely furnished to the partners, and contain all other required information.
  • The person or partnership required to file the Schedule K-1, or other applicable form or statement, files with the IRS no later than one year after the original unextended due date of the form to which the Schedule K-1 or other applicable form or statement must be attached. A schedule setting forth the information listed below for each partner for which negative tax basis capital account information is also required.

The required schedule must state:

  1. the partnership’s name and Employee Identification Number, if any, and Reference ID Number, if any;
  2. the partner’s name, address, and taxpayer identification number; and
  3. the amount of the partner’s tax basis capital account at the beginning and end of the tax year at issue.

The schedule should be captioned “Filed Under Notice 2019-20” and should accord with instructions and additional guidance provided by the IRS. The schedule should be sent to: 1973 North Rulon White Blvd., Ogden, UT 84404-7843, MS 4700, Attn: Ogden PTE.

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).

Learn more about our Tax & Accounting Services practice