The agencies plan to issue a notice regarding this, stating that there will be no penalty assessed for tax year 2020 if there is an error on the partners’ tax basis capital accounts reporting on Schedule K-1. This will cover the transition period for the 2020 tax year.
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Partnerships that did not prepare 2019 Schedule K-1 under the tax capital method or otherwise maintain tax basis capital accounts in their books and records may determine each partner’s beginning tax basis capital account balance for 2020 using one of the following methods: Most partnerships are already using this method to report partners’ capital accounts. other decreases or increases using this tax basis principle rather than reporting using different methods, such as Generally Accepted Accounting Principles (GAAP).Īlthough this may sound like a significant change, according to the IRS’s data, it may not affect most of the partnerships.each partner’s share of the partnership’s net loss or income for the year and.This tax basis method requires partnerships to report several elements, including: Partnerships must use this tax basis method to calculate their partner capital accounts. The altered instructions require partnerships to use the transaction approach when filing this form for the 2020 tax year. The goal of the change is to facilitate greater compliance.
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The instructions aim to improve the quality of the information that the partnerships report to both the IRS and their partners. The IRS has released these revised instructions as part of a more widespread agency effort to improve compliance. These revised instructions require partnerships to report partners’ tax basis capital account balances on Schedule K-1.įacilitating Increased Compliance by Improving Information Quality They apply to the 2020 tax year (or 2021 filing season). The IRS has released an early draft of instructions for 2020 Form 1065, U.S.