Changes to 2011 Partnership Returns

Partnership return for 2011 reflect numerous changes.  Form 1065, Reporting for US Partnerships are due by April 16, 2012 (for calendar year partnerships).

Here are some of the new items we will need to address during this filing year.

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. Instead, partnerships are directed to report gross receipts or sales from all business operations as indicated on the instructions for lines 1a through 1d. Line 1a is entitled Merchant Card and third-party payments including amounts reported on Form(s) 1099(k). Because of the deferral of the separate reporting requirement, partnerships are directed to enter zero on line 1a. Line 1b is entitled gross receipts not reported 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 lines 4 through 7.

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) 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.

Form 5471, Return of US Persons With Respect To Certain Foreign Corporations

On Schedule B, IRS added a new line 19 for Form(s) 5471 filed. Form 5471 is used by certain U.S. citizens and residents who are officers, directors, or shareholders in certain foreign corporations. The form and schedules are used to satisfy the reporting requirements of Code Sec. 6038 and Code Sec. 6046 , and their regs.

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, Return by a Shareholder of a Passive Foreign Investment Company

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 regarding the filing of your 2011 Partnership returns, please do not hesitate to contact us.

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