n-19-20.pdf

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Part III – Administrative, Procedural, and Miscellaneous

Penalty Relief for Missing Negative Tax Basis Capital Account Information

Notice 2019-20

This Notice provides penalty relief under sections 6722 (failure to furnish correct
payee statements); 6698 (failure to file partnership return); section 6038(b) and (c)
(failure to furnish information with respect to certain partnerships) of the Internal
Revenue Code (Code); and any other section of the Code for filing or furnishing
Schedules K-1 or other forms or statements, where a penalty is imposed solely as a
result of failing to include information about partners’ negative tax basis capital accounts
for taxable years that began after December 31, 2017, but before January 1, 2019.
BACKGROUND
Item L of Schedule K-1 to Form 1065 and Item F of Schedule K-1 to Form 8865
require reporting a partner’s capital account. Generally, a partnership may report
partner capital to a partner using tax basis, Generally Accepted Accounting Principles,
section 704(b) book, or some other method. Pursuant to updates, the 2018 Instructions
for Form 1065 and Partner’s Instructions for Schedule K-1 (Form 1065) to Item L now
require a partnership that does not report tax basis capital accounts to its partners to

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report, on line 20 of Schedule K-1 (Form 1065) using code AH, the amount of such
partner’s tax basis capital both at the beginning of the year and at the end of the year if
either amount is negative (negative tax basis capital account information). The
Instructions for Form 8865, Schedule K-1, incorporate this requirement by reference to
the Instructions for Form 1065.
The Treasury Department and Internal Revenue Service (IRS) have become
aware that certain persons and partnerships may be unable to comply timely with this
new requirement.
PENALTY RELIEF
The IRS will waive penalties under section 6722 for failure to furnish a partner a
Schedule K-1 (Form 1065) and under section 6698 for failure to file a Schedule K-1
(Form 1065) with a partnership return, under section 6038 for failure to furnish a
Schedule K-1 (Form 8865), and under any other section of the Code for failure to file or
furnish a Schedule K-1 or any other form or statement, for any penalty that arises solely
as a result of failing to include negative tax basis capital account information if both the
following conditions are met:
1. The Schedule K-1 or other applicable form or statement is timely filed,
including extensions, with the IRS; is timely furnished to the
appropriate partner, if applicable; and contains all other required
information.
2. The person or partnership required to file the Schedule K-1 or other
applicable form or statement files with the IRS, no later than one year
after the original, unextended due date of the form to which the

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Schedule K-1 or other applicable form or statement must be attached,
a schedule setting forth, for each partner for which negative tax basis
capital account information is required:
a. the partnership’s name and Employee Identification Number, if
any, and Reference ID Number, if any;
b. the partner’s name, address, and taxpayer identification
number; and
c. the amount of the partner’s tax basis capital account at the
beginning and end of the tax year at issue.
The schedule should be captioned “Filed Under Notice 2019-20” and accord with
instructions and additional guidance posted by the IRS on IRS.gov.
The due date for this supplemental schedule is determined without consideration
of any extensions, automatic or otherwise, that may apply to the due date for the form
itself. The schedule should be sent to the following address:
1973 North Rulon White Blvd.
Ogden, UT 84404-7843
MS 4700
Attn: Ogden PTE
This penalty relief applies only for a taxable year beginning after December 31,
2017, but before January 1, 2019. To receive a penalty waiver, a person or partnership
is not required to file or furnish amended Schedules K-1 or other applicable amended
forms or statements to partners or the IRS, or to file an administrative adjustment
request under section 6227, if applicable. Partnerships or other persons should not

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delay filing or furnishing Schedules K-1 or other applicable forms or statements on
account of this Notice. The timely filing and furnishing, including extensions, of
Schedules K-1 or other applicable forms or statements is a requirement to be eligible for
relief under this Notice. The IRS will post instructions and additional information about
the relief provided by this Notice in the coming weeks on IRS.gov, where forms,
instructions, and other tax assistance are available.
The penalty relief under this Notice will allow additional time for persons and
partnerships to provide the negative tax basis capital account information with respect
to their taxable years beginning after December 31, 2017, but before January 1, 2019.
CONTACT INFORMATION
The principal author of this Notice is Isaac Brooks Fishman of the Office of the
Associate Chief Counsel (Procedure and Administration). For further information
regarding this Notice contact Isaac Brooks Fishman at (202) 317-6844 (not a toll-free
call).