IMPORTANT UPDATE – Form 1065 Reporting Partners’ Tax Capital

Posted on Wed, Dec 11, 2019 ©2021 Drucker & Scaccetti

irs-logo-resized-600Last week, we reported an important change on Form 1065 requiring partnerships to report tax basis partners’ capital accounts starting with 2019 filings. Since many partnerships do not currently report or even track this information, the change could be extremely problematic. However, the IRS has slightly changed course, making the change a bit more palatable, but the over-arching challenge still remains.

 

In Notice 2019-66, the IRS announced that the new requirement to report partners’ shares of partnership capital on the tax basis method will not be effective for 2019, but will be effective beginning in 2020 (for partnership taxable years that begin on or after January 1, 2020).  For 2019, partnerships and other persons must report partner capital accounts consistent with the reporting requirements in the 2018 forms and instructions, including the requirement to report negative tax basis capital accounts on a partner-by-partner basis. 

 

Though the one-year reprieve is welcomed, gathering this information may still be a huge undertaking for many partnerships; particularly those with long-time partners. Partnerships impacted by this change should contact their tax advisors immediately. Recovering and tracking information can be difficult and time consuming and starting sooner rather than later is the wisest course of action.

Topics: partnership, tax basis, form 1065, Notice 2019-66, partners capital

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