Editorial · March 23, 2017
Partnership Tax Return Due Date: The New March 15 Rule
Partnership tax return due date rules changed, and the new date is March 15. A calendar-year partnership now files Form 1065 by the 15th day of the third month after its tax year ends. For most partnerships, that means March 15. This year, that date fell on Wednesday, March 15, 2017, and it has already passed.
If your partnership has not filed yet, read on. The steps below are short, and the cost of waiting grows each month.
What the partnership tax return due date is now
The rule is simple. A domestic partnership files Form 1065 by the 15th day of the third month after the close of its tax year. A partnership on the calendar year closes on December 31, so its due date is March 15.
A partnership on a fiscal year counts three months from its own year end. A year that ends on June 30 gives a due date of September 15. The usual weekend rule still applies. If the due date falls on a Saturday, a Sunday or a legal holiday, you file by the next day that is not one of those.
What changed from the old April date
Until the 2015 tax year, a partnership filed Form 1065 by the 15th day of the fourth month. For a calendar-year partnership, that was April 15. The 2015 instructions say so in plain words.
The 2016 instructions say the date has changed to the third month for tax years beginning after 2015. So the 2016 return, the one due this spring, is the first to follow the new date. Congress made the change in a law signed on July 31, 2015, which covered highway funding and veterans health care. The tax change sits in Section 2006 of that law.
One point causes confusion. S corporations did not get a new date. They already filed by March 15, and the law now writes that date down for both partnerships and S corporations. The move toward the fourth month went the other way, to C corporations. Their returns are due on the 15th day of the fourth month for tax years beginning after 2015, which is April 15 for a calendar-year company.
Why the date matters to partners
A partnership gives each partner a Schedule K-1, which shows that partner's share of income, losses and credits. Partners need those numbers to finish their own returns. The IRS says the partnership must furnish the copies by the date Form 1065 is required to be filed, including extensions.
With a March 15 filing date, a calendar-year partnership owes its partners their K-1 copies about a month before the usual April 15 individual deadline, unless it files an extension. That gives partners more time to use the numbers.
How the extension works
A partnership that needs more time files Form 7004 to ask for an extension. The form must be filed by the regular due date of the return. It can be filed electronically.
The same law tells the Treasury to set the longest extension for partnership returns at six months, ending on September 15 for calendar-year filers. The December 2016 instructions for Form 7004 describe an automatic six-month extension for these returns.
An extension gives more time to file. It does not change any other date, so check each date that applies to your partnership. For this year, the window to file Form 7004 closed with the March 15 due date.
What late filing costs
The IRS charges a penalty when a partnership fails to file by the due date, including extensions. The 2016 instructions set it at $195 for each month or part of a month, up to 12 months. The amount is then multiplied by the number of partners who were in the partnership at any time during the tax year.
Here is a simple example. A partnership with four partners that files two and a half months late owes three months of penalty. That is $195 times three months times four partners, or $2,340.
A separate penalty can apply for each Schedule K-1 that is late or wrong. The instructions list it at $260 per K-1. The IRS can waive the late filing penalty if the partnership shows reasonable cause. Do not attach an explanation to the return, though. The instructions say the partnership can respond if it later receives a penalty notice.
A short checklist for next year
- Put March 15 on the calendar in January, not in March.
- Ask your bookkeeper to close the books for the year early, so the K-1 numbers are ready.
- Decide by early March whether you need Form 7004, and file it before the due date.
- Send each partner a Schedule K-1 on time. Late K-1s carry their own penalty.
- If a due date lands on a weekend, plan to file on the next business day, but do not count on it.
If you missed this year's deadline, file as soon as you can. The penalty is counted by the month, so each day you save can matter. Ask a tax professional about reasonable cause if you think it applies.