When a partnership dissolves, terminates, or ceases operations, a final tax return must be filed by the 15th day of the third month following the date its tax year ended.

The IRS instructions for Form 1065, U.S. Return of Partnership Income, generally allow a prior-year Form 1065 to be used for certain short tax year returns when the new-year form is not yet available. TaxAct® does not support preparing a short tax year Form 1065 return in a future tax year when the final forms for that tax year have not yet been released.

TaxAct calculations are based on the tax law for the year of the program being used. Entering beginning and ending dates for a future tax year will not cause the program to calculate the return using that future year’s tax law.

Per the IRS Instructions for Form 1065, under Period Covered, Form 1065 is used for the calendar year shown on the form and for fiscal years that begin in that year and end in the following year. For a fiscal year or short tax year, the partnership must fill in the tax year space at the top of Form 1065 and each Schedule K-1 or Schedule K-3, if applicable.

The IRS instructions also state that a prior-year Form 1065 may be used if:

• The partnership has a tax year of less than 12 months that begins and ends in the following year, and
• The following year’s Form 1065 is not available by the time the partnership is required to file its return.

The partnership must show the correct tax year on the prior-year Form 1065, and incorporate any tax law changes that are effective for tax years beginning after the year of the form being used.

Therefore, if the due date of the final tax return falls before the new year’s tax forms are released by the IRS, you will need to use the current available year’s tax forms.

As a possible workaround, you may manually enter any amounts affected by new-year tax law changes and paper file the return. You will need to verify that the proper amounts are reported on Form 1065 based on the applicable tax law and override any entries that would be changed due to tax law changes. TaxAct will calculate the return based on the tax code for the year of the program being used.

An Alert generates showing: Error or Omission: Invalid Tax Year – An invalid tax year has been entered. The tax year must begin in the year supported by the program, and the ending date must be after the beginning date. This Alert will prevent the return from being e-filed.

FAQ: 21850