Technical topics regarding tax preparation.
Partnership penalty abatement Rev. Proc. 84-35
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30-Jul-2019 6:12pm

Anybody used this Rev. Proc? Client's first time filing of form 1065 for 2018 for 2 partners and he wasn't aware of the partnership return deadline. I rather not do a first time abatement which we can use for something else in my client's case, such as underpayment of estimated tax. However, correct me if I'm wrong.

Rev. Proc. 84-35 penalty relief to apply and concluded that it is the same criteria that has been documented in IRM 20.1.2.3.3.1(2):

1. The partnership must consist of 10 or fewer partners. For the purpose of this requirement, a husband and wife (or their estate) filing a joint return is considered one partner.

2. Each partner is either an individual (excluding nonresident aliens), or the estate of a deceased partner.

3. Each partner's items of income, deductions, and credits are allocated in the same proportion as all other items of income, deductions, and credits.

4. The partnership has not elected to be subject to the consolidated audit procedures under I.R.C. §§ 6221 through I.R.C. § 6233 (subchapter C).

5. Each partner reported his or her share of partnership income on his or her timely filed income tax return.

30-Jul-2019 7:12pm

yes. i do.

30-Jul-2019 9:23pm

You can look up previous discussions, but I believe that Rev Proc 84-35 does not apply to 2018 partnership returns due to the repeal of Section 6231 and the "new" Section 6231 under the BBA, effective for 2018.

31-Jul-2019 9:08am

Thanks! It took a while to find even anything about this, except for the post on this forum and the links in that post. It appears that if we had elected out of the new audit rules, Rev Proc 84-53 could still be used. I would have expected that internet searches would have netted more results about that Rev Proc 84-53 can no longer be used.
Also, the IRS still has Rev Proc 84-53 on their site dated 2/27/19 under Understanding Your CP162 Notice. Confusing.
If anyone has successfully used it for 2018, please let us know.

https://www.irs.gov/individuals/underst ... 162-notice
Feb 27, 2019 - The partnership had no more than 10 partners for the taxable year. ... to have the penalty removed for reasonable cause under the provisions of Rev. Proc. 84-35 ...
Missing: 84-53 ‎| Must include: 84-53

31-Jul-2019 9:12am

Andrew wrote:If anyone has successfully used it for 2018, please let us know.



i did for 2018, several times, the letters of abatement has not yet arrived, but at least the scary demands for payment have stopped, :lol:

31-Jul-2019 1:55pm

Did you elect out of the new audit rules for these partnerships for 2018?

31-Jul-2019 3:19pm

more on 84-35 "expiration"
The definition of small partnership used in the Conference report and Section 6698 is defined in (the former) Section 6231!

The small partnership exception was a TEFRA provision, and now TEFRA is gone.

Here is an interesting article: http://washburnlaw.edu/practicalexperie ... eption.pdf

A quick note here: https://ktllp.com/2018/01/heads-major-c ... uary-2018/

And here is some "reasoning" with the IRS already squeezing the exception: https://www.currentfederaltaxdevelopmen ... equirement

31-Jul-2019 7:17pm

Thanks for posting the links. From the last article, It sounds like it's not set in stone yet that Rev Proc 84-35 cannot be used for 2018. Is that your understanding as well?


While the IRS has not mentioned how or whether that will impact the small partnership relief ruling, the Service may decide that Congress’s intent in passing the revised partnership audit regime is no longer consistent with this grant of relief. Remember that under the new audit rules, a partnership is subject to the consolidated audit procedures unless it timely files a return and elects not to have the rules apply. Arguably, a partnership that fails to file a return beginning with 2018 tax years has forfeited the right to be treated as a small partnership.

31-Jul-2019 8:14pm

The last article, written in 2017, notes how the IRS was pushing back against Rev Proc 84-35; even then. The citations in the article refer to Code Sections that have been repealed & replaced for 2018. Given that the Code Section that stands as the foundation for Rev Proc 84-35 has disappeared I think Rev Proc 84-35 no longer stands for returns filed for 2018 and later.

Juro can let us know in a couple months!

Although, the IRS notices my clients have received over the last couple weeks indicate the IRS is having problems understanding the tax laws.

31-Jul-2019 8:27pm

I've never understood why small partnerships were given relief under a rev proc while small S Corps were not given the same relief.

Yes juro, please update us once you receive a response.

12-Aug-2019 10:07am

uh oh, got a IRS notice "assigned to Collection Agency."


this is only one page. weird, they don't even mention our response, or a balance due.

12-Aug-2019 12:12pm

How much time elapsed between your response and this collection agency notice?

12-Aug-2019 1:59pm

sjrcpa wrote:How much time elapsed between your response and this collection agency notice?



May of this year is when i got the first & only notice, and my response was same time.

12-Aug-2019 2:49pm

Given that it takes 6, 8 or 12 weeks for IRS to do anything, I am not surprised.
I would call, explain you responded and disagreed, and ask for a hold on collection for the account.

13-Aug-2019 10:18pm

okay i will.

but when did the IRS begin to use a collection agency?

13-Aug-2019 10:35pm

For about a year now. They tried this program a few years ago and the program failed, which I’m hoping this one will too.

So frustrating. You call the CBE Group, one of the collection agencies, and they don’t authorize any payment plan beyond 60 months. You ask why and they tell you the Installment agreement beyond 60 months request needs the IRS’s permission to be granted. You call the IRS and they say, “Your client’s account has been assigned to a collection agency.” Back and forth you go. It’s driving me a bit batty.

I’m thinking when the Millennial generation (no offense meant here) take over the IRS there will be safe spaces available for taxpayers and forgiveness of tax debts if a taxpayer feels anxious/nervous about their liability or if the “IRS” triggers a sensory overload. Also, they will immediately ship you a service animal and a box of crayons for comfort. That’s my hope anyway.

14-Aug-2019 6:49am

Aye, Dave, but they will have to remove all the blue and green crayons in case the recipient draws something resembling algae, which then freaks out the emotional support animal.

Seriously, isn't there a clear process by which you can require that the file be reassigned to the IRS? Never had to worry about that since they started outsourcing again. If they don't do that, at what point does one ask the TA to get involved?

14-Aug-2019 11:01am

why did my response get ignored by the IRS?

what if i ignore the collection agency?

14-Aug-2019 11:41am

Your response was probably not ignored. It probably hasn't been dealt with yet. If you have a POA on file you can call and discuss. If you don't, anty reponse IRS makes will go to your client.

14-Aug-2019 2:28pm

sjrcpa wrote:Your response was probably not ignored. It probably hasn't been dealt with yet. If you have a POA on file you can call and discuss. If you don't, anty reponse IRS makes will go to your client.


my client uses my office address, as he is a non-res alien.
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