The IRS today released an advance version of Notice 2017-71 that:
Notice 2017-71 [PDF 28 KB] clarifies guidance provided earlier this year in Notice 2017-47.
The IRS on December 14, 2017, issued an updated version of Notice 2017-71 to clarify that the penalty relief also applies to fiscal-year filers whose tax years began in 2016, but did not end until 2017. Read an IRS release (IR-2017-205). The hyperlink to the notice (above) is the updated version.
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the date by which a partnership and other entities must file their annual returns. For calendar year partnerships, the due date for filing the annual return or request for an extension was changed from April 15 (April 18 in 2017) to March 15.
The new due date applies to returns of a partnership for tax years beginning after December 31, 2015.
The IRS in September 2017 issued Notice 2017-47. As originally issued, Notice 2017-47 stated that the IRS will grant relief from certain penalties for returns identified in Notice 2017-47, for the first tax year of any partnership that began after December 31, 2015—provided that the following conditions are satisfied:
Subsequently, the IRS re-issued Notice 2017-47 to clarify that the penalty relief applies both to partnerships and to real estate mortgage investment conduits (REMICs on Form 1066) that are treated as partnerships for purposes of subtitle F (concerning procedure and administration). Read TaxNewsFlash-United States
Notice 2017-71 amplifies, clarifies, and supersedes Notice 2017-47, and states that the IRS will treat Forms 1065, 1065-B, 1066, 8804, 8805 and additional returns, such as Form 5471, as timely filed for the first tax year that began after December 31, 2015, and ended before January 1, 2017, by:
if the entity took any required action by the date that would have been timely under section 6072 before the change by the Surface Transportation Act (that is, April 18, 2017, for calendar year taxpayers).
Notice 2017-71 continues to explain that the entity will nevertheless be liable for any interest due under section 6601 for the period measured from the date prescribed for payment until the date that actual payment was made.
Notice 2017-71 states that if an entity has already been assessed a penalty for failure to timely file a return that is deemed timely filed (under today’s notice), that entity can expect to receive a letter from the IRS “within the next several months” notifying the entity that the penalty has been abated. It also provides instructions for seeking reconsideration of any penalty covered by Notice 2017-71 that has not been abated by February 28, 2018.
Today’s notice further provides that for other acts deemed timely—such as elections—the entity is to file its return consistent with the treatment of the acts as being performed timely (as provided by Notice 2017-71) and the entity does not need to take further action to obtain relief unless it is contacted by the IRS.
Tax professionals familiar with the issues identified in Notice 2017-71 have commended the IRS and its Office of Chief Counsel for this proactive approach with regard to the compliance fallout stemming from the filing due date changes provided by the Surface Transportation Act of 2015—changes that were applicable for the first time during the 2017 filing season. The IRS officials initially acted promptly to provide well-tailored and straight-forward global penalty relief for certain late filers in Notice 2017-47, and now similarly do so in providing today’s global relief, particularly as it applies to elections required to be made on timely filed returns. In addition, Notice 2017-71 clarifies that late payment penalties should also be abated for taxpayers who filed late but within the parameters of the notice for payments made with their returns.
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