Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Are You Aware of the New Changes for 2011 on Partnership Returns?

In an ongoing effort to ensure the proper amount of income and deductions are reported and that the proper amount of tax is collected, the Internal Revenue Service is ever evolving its tax forms. You can always find these changes on the first pages of the tax form’s instructions, under the heading “What’s New”.  Here are the applicable changes to the 2011 Form 1065, U.S. Return of Partnership Income:

Merchant card and third-party payments. For the 2011 tax year, IRS has deferred the requirement to separately report on Form 1065 the amount of merchant card and third-party network payments from Form 1099-K, Merchant Card and Third-Party Network Payments. Because of the deferral of the separate reporting requirement, partnerships are directed to enter zero on line 1a. Partnerships are directed to report on line 1b gross receipts or sales from all business operations (including gross receipts or sales included in any amounts reported to the partnership on Form(s) 1099-K), except for amounts that must be reported on line 4 through 7.

… Form(s) 1099. On Schedule B, IRS added new line 18a and new line 18b regarding Form(s) 1099. Line 18a asks whether the partnership made any payments in 2011 that would require it to file Form(s) 1099. If the answer is yes, the partnership must respond on line 18b whether it did or will file all required Form(s) 1099.

Cost of goods sold. IRS has deleted Schedule A (Cost of Goods Sold) from Form 1065. Cost of Goods Sold is now reported on new Form 1125-A, which has not yet been finalized but is available in draft form on IRS’s website.

Foreign government partners. On Schedule B, Other Information, line 3a, IRS added “any foreign government“ to the list of partners the partnership may need to disclose.

Form(s) 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations. On Schedule B, IRS added a new line 19 for Form(s) 5471 filed.

Loans to/from partners. On Schedule L, Balance Sheet per Books, IRS added new line 7a, Loans to partners (or persons related to partners), and a new line 19a, Loans from partners (or persons related to partners).

Form(s) 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. The draft Form 1065 instructions note that certain partnerships may have to file Form 8621.

Form 8938, Specified Foreign Financial Assets. The draft Form 1065 instructions note that certain partnerships may be required to file new Form 8938.

If you have any questions on any of the above changes, please contact a professional for assistance.

By Jeremy Smith, CPA