Service issues limited waiver from Form 1065 electronic filing requirement.

Since 1986, the IRS has encouraged various programs for the electronic filing of Form 1065, U.S. Return of Partnership Income. The IRS Andover Submission Processing Center (ASPC) was responsible for receiving and processing partnership returns submitted on magnetic tapes, diskettes and electronic transmissions via the Bulletin Board System (or MITRON). Participants could either file the entire Form 1065 electronically or use the "Paper-Parent Option" method, which allowed the body of Form 1065 and related forms and schedules to be mailed to ASPC and the Schedules K-1 to be transmitted electronically.

After several false starts, beginning with tax year 1999 partnership returns, the Service announced that it would no longer accept returns submitted on magnetic media, or transmitted electronically via MITRON or the Bulletin Board System. In addition, the IRS discontinued the Paper-Parent Option.

When it was pointed out to the Service that software providers had not as yet built sufficient export facilities to process all of the appropriate and necessary forms to be attached to Form 1065, the IRS relented and said it would not be mandatory to file Form 1065 electronically by 1999. The Paper-Parent Option was, however, no longer available. The choice then was electronic filing or full paper filing.

For the 2000 tax year, partnership returns have to be transmitted electronically to the Electronic Management System (EMS) at the Memphis Submission Processing Center.

The Service has become aware that some partnerships cannot file electronically, because the necessary software for certain forms is not yet available. Ann. 2001-75 describes how partnerships required to file electronically under Sec. 6011(e)(2) may request a Sec. 6724(a) waiver, for reasonable cause, for failing to file electronically.

This announcement is only applicable to waiver requests made by taxpayers required to file forms and schedules not available electronically and that cannot file such forms as attachments to Form 8453-P, U.S. Partnership Declaration and Signature for Electronic Filing. Forms that may be attached to Form 8453-P are listed in the announcement. The IRS will not grant a waiver request for certain forms (e.g., Schedule A (Form 5713, International Boycott Report), and Schedule M (Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations). Ann. 2001-75 is not applicable to other types of waiver requests, such as economic hardship.

To initiate a waiver request pursuant to Ann. 2001-75, a partnership must submit the following information to the Memphis Submission Processing Center by Oct. 1,2001:

* Partnership name;

* Federal employer identification number (EIN);

* Number of K-1s;

* Name of software being used; and

* Unavailable forms and schedules.

To assure that penalties will not be assessed, the required waiver request must be attached to the Form 1065 and a notation in large red letters should be placed on page 1 of the Form 1065: "Waiver Request IRC Section 6011(e)(2)."

The waiver request must contain the following information:

1. A notation at the top, "Waiver Request IRC Section 6011(e)(2);"

2. Partnership name, Federal EIN and address;

3. Tax year for which the waiver is requested;

4. A detailed statement that lists:

--What steps the partnership has taken to meet its requirement to file its return electronically;

--Why the steps were unsuccessful;

--What steps the partnership will take to assure its ability to electronically file its partnership return for the next tax year;

5. A statement signed by the tax matters partner (as defined in Sec. 6231(a)(7)), stating:

Under penalties of perjury, I declare that the information contained in this waiver request is true, correct and complete to the best of my knowledge and belief.

Requests from the partnership's tax adviser do not have to be accompanied by a power of attorney. If a valid power of attorney is not on file, questions about the waiver will be addressed to the partnership.

Within 30 days after receiving the waiver request, the Service will notify the partnership if it is denying the waiver request. A denial of the waiver request cannot be appealed.

Waiver requests should be addressed to:

Internal Revenue Service P.O. Box 420 Memphis, TN 38101-0420 Attn: Electronic Filing Unit, Stop 2711

Or fax the request to 901-546-2544.

Editor's note: Mark Ely is former chair of the AICPA Relations with the IRS Committee. Deborah J. Pflieger is the current chair. Ms. Barners, Ms. Hyde and Messrs. DeGeorgio, VanDeveer and Goldstein are members of that committee.

FROM ROBERT L. GOLDSTEIN, CPA, LEIPZIGER & BKESKIN LLP, NEW YORK, NY