Thinking Ahead: Consider Extending Your 2020 Partnership Tax Returns!

The Bipartisan Budget Act (BBA) of 2015, which replaced the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, became effective for tax years beginning January 1, 2018. The most notable change under the BBA is how adjustments can be made to previously filed partnership tax returns. Generally speaking, amended tax returns are no longer allowed.

Under the BBA, partnerships would need to file an Administrative Adjustment Request (AAR), as compared with the previously permitted amended tax return, to correct errors on partnership-related items. With the new centralized partnership audit regime, a partnership’s tax return can be modified, as long as the filing deadline has not yet passed, by submitting a superseding tax return. A superseding tax return is different than an amended tax return, as it replaces any other tax return that was previously filed within the filing period, thus making it the tax return of record. A superseding tax return will provide the opportunity to file attachments or elections that might have been overlooked initially (and if missed, be considered late).

While special rules applied to 2018 and 2019 partnership tax returns because of the COVID-19 pandemic, those same rules probably won’t be around for 2020. Looking ahead:

• If you need to get Schedule K-1’s out the door, do it. Keep your investors and clients happy!
• Just don’t file partnership tax returns before the original due date, if you can help it. Extend and then file.
• Remember that if something comes up, you can file superseding tax returns through the extended due date.

Sources: IRS.gov, The Tax Adviser, RIA Checkpoint