The initial due date for filing Forms 8971 has been pushed back for the third (and likely final) time by the IRS in Notice 2016-27. The notice provides that both the statements to be furnished to the IRS (Forms 8971 and the Schedule As) and those to be provided to the beneficiaries (Schedule A) that are due prior to June 30, 2016 need not be provided to the IRS or the beneficiaries prior to that date.
The form is required to be filed by executors of estates who are required to file a return (as that term is defined in the proposed regulations issued in early March of 2016) if that return is filed after July 31, 2015. The return is due 30 days after the earlier of the date the Form 706 is filed or when it was required to be filed (including extensions actually granted). [IRC §6035 as added by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015]
Congress did not provide for a delayed filing for the first returns when the law was passed, thus the initial due date per the law was August 31, 2015 for those executors who either filed a Form 706 on August 1 or, even though not filed, should have filed a Form 706 with a due date of August 1.
Given that no forms existed on which to make such a report and guidance beyond merely that which Congress had written into the law was realistically necessary to comply with the new §6035, the IRS quickly issued Notice 2015-57 that provided that any reports due before February 29, 2016 need not be filed before that date.
The IRS did publish the final version of Form 8971 and instructions before that deadline, but had not issued the proposed regulations as the deadline approached. The IRS issued Notice 2016-19 in February 2016 pushes the deadline back to March 31, 2016 to allow for publication of those proposed regulations.
The proposed regulations were issued early in March of 2016. The AICPA, in a letter to the IRS dated the same date as the proposed regulations were officially published in the Federal Register, asked for a further extension of time to May 31. The AICPA letter noted that, especially with the regulations being published during the tax filing season and less than 30 days before the first forms had to be filed, that there was insufficient time to inform taxpayers, analyze the regulations and implement the proposed regulations. The organization also noted that software vendors also will need to update tax software to allow for proper processing of the form.
The IRS decided to grant not just the extension to May 31 the AICPA requested, but to add one month to that extension. The notice provides:
The Treasury Department and the IRS have received numerous comments that executors and other persons have not had sufficient time to adopt the systemic changes that would enable the filing of an accurate and complete Form 8971 and Schedule A.
Presumably the IRS, having now granted an extension of time beyond that requested by the AICPA, is unlikely to grant yet another extension of time in this case. But the good news is that the Forms 8971 will not need to filed two weeks before the individual and fiduciary income tax deadline of April 15. Of course for practitioners that have already spent significant time during the past couple of weeks scrambling to meet the March 31 deadline there may be some wonder about the IRS waited this long to grant relief.