By: Amanda Wilson
Undoubtedly, right before the end of the year, you were inundated with information about steps you could take as part of the year-end tax planning for your business. While the end of the year does offer great tax planning opportunities, there is another important time that often goes unnoticed – April 15th. If your business uses a tax partnership (which can be in the form of a general partnership, limited partnership, or limited liability company), take action now. You do not want to miss the boat on this significant tax planning opportunity.
The partnership tax rules allow partners to amend their partnership agreement retroactively to January 1 of the prior year if the amendment is in place before the tax return (without extensions) for that year is due. More simply, an amendment made before April 15, 2015 can be made effective for the 2014 tax year. For this reason, now is the time to review how your partnership will be allocating taxable income and losses to its partners for the 2014 tax year. Often times, the allocations may give you unexpected or unfavorable results. Is one partner allocated losses that he cannot use? Is another partner getting a huge allocation of taxable income unexpectedly?
If the answer is yes, consider making changes. Some simple tax planning could minimize or avoid these tax results. But you have to act now. Unfortunately, once the original due date for filing the partnership return has passed, this planning opportunity is lost, even if your partnership received an extension for filing its return.