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IRS provides penalty relief for partnerships that fail to report negative tax basis capital accounts

Mar 07, 2019

On March 6th, the IRS released Notice 2019-20 providing penalty relief for taxpayers who are not able to comply with the new negative tax basis capital accounts.

The IRS will waive penalties under section 6722 for furnishing a partner a Schedule K-1 and section 6698 for filing a Schedule K-1 with a partnership return that fails to report negative tax basis capital account information if both the following conditions are met:

  1. The partner Schedules K-1 are timely filed, including extensions, with the IRS and furnished to the partners and contain all other required information.
  2. The partnership files with the IRS no later than 180 days after the six-month extended due date for the partnership’s Form 1065 or, for a calendar year partnership, no later than March 15, 2020, a schedule setting forth, for each partner for whom the partnership is required to furnish negative tax basis capital account information, the partner’s name, address, taxpayer identification number, and the amount of the partner’s tax basis capital account at the beginning and end of the tax year at issue in accordance with instructions and additional guidance posted by the IRS on  Whether or not a partnership files a Form 7004, it can use the six-month extended due date in calculating the due date for filing the required schedule described in this paragraph. 

The schedule should be sent to the following address:
1973 North Rulon White Blvd. Ogden, UT 84404-7843
MS 4700
Attn: Ogden PTE

This penalty relief applies only for a partnership’s taxable year beginning after December 31, 2017, but before January 1, 2019.