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Corporate tax returns are latest forms to get IRS once-over

The Internal Revenue Service's form revision process isn't quite the red-pencil technique used on text documents, but it gets the job done. The latest group of revised tax forms will affect corporate taxpayers. (Photo via pxhere)

Many business taxpayers and their tax advisers are working this week on the Form 1120 returns that that they extended until Oct. 15.

Next year, though, these corporate filers will be looking at a new return.

The Internal Revenue Service is continuing to tweak a wide variety of returns, many in response the changes made by the Tax Cuts and Jobs Act (TCJA).

The 2019 versions of Form 1120-S, U.S. Income Tax Return for an S Corporation and its Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, etc., are among those that have joined the revision list.

Draft 2019 Form 1120-S excerpt

In addition, the IRS also proposes some changes to the 2019 tax year  Form 1065, U.S. Return of Partnership Income and its Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.

Draft 2019 Form 1065 excerpt

Why revise: The TCJA was a reason for the changes to the forms and schedules, says the IRS, but the increase in corporate filings also prompted the revisions.

"For calendar year 2004, about 2.5 million partnerships filed Form 1065; by calendar year 2017, that number had risen to more than 4 million, an increase of 59 percent," said the IRS in announcing the form updates. "The rise in filings by partnerships was considerably greater than the rise in filing by C-corporations and S-corporations, combined, which rose about 14 percent over the same timeframe."

More corporate filings, says the agency, underscored its need to improve the data available for its compliance selection processes.

Plus, the changes should produce a bonus for business taxpayers.

"The additional information requested in the draft Form 1065 and Schedule K-1 is intended to aid the IRS in assessing compliance risk and identifying potential noncompliance while ensuring that compliant taxpayers are less likely to be examined," according to the IRS.

More form details: You can peruse the proposed form changes — the links to the full PDF forms are shown earlier in this post — at your leisure.

I also suggest you give CPA Ed Zollars' more detailed overview of the revised 1064, 1120-S and associated K-1 forms a look.

Some of the more significant revisions, notes Zollars at the Current Federal Tax Developments website, are:

  • Required use of tax basis capital for the capital account reconciliation on Schedule K-1 for partnerships;
  • Disclosure of additional information related to §704(c) transactions on the partnership Schedule K-1;
  • Guaranteed payments will have to be split on the partnership K-1 between those for capital and those for services;
  • Additional information on the existence of activities for at-risk and passive activity purposes on all forms; and
  • Switch to the descriptive text disclosures for §199A information that was first revealed on the July draft of the Form 1120-S Schedule K-1.

After checking out the proposed changes, you can let the IRS know if you think it's on the right track or should make additional revisions by sending the agency your thoughts via email at IRS.gov/FormComments. The deadline for public comment ends on Oct. 30.

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