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June 2009 - Systemic Issue Management System (SIMS) at Work

This month I wanted to share some of the efforts we are taking in regards to the SIMS inquires. Through this new system, we have received many comments and suggestions.

Part of our process is to determine whether or not the issue is systemic and, if so, what steps and business areas we need to take to resolve the issue.

The following are just two issues that we are looking into:

1. Federal and state laws differ with regards to filing requirements for LPs that convert to LLC in mid-year, and LLCs that convert to LP. Conversion between an LP and LLC entity designation mid year can present filing problems if a return for each entity type must be filed at year-end. This could create confusion especially if for California there are two returns and two sets of K-1's, while federal rules may consider the entity a partnership for the entire year. We are currently reviewing our forms and return filing processes and will provide an update on this issue in an upcoming addition of tax news.

2. Filing instructions for Form 541 for a Qualified Subchapter S Trust (QSST). Should the 541 instructions be changed, to allow QSSTs to file the 541 by completing the entity portion and then attach a statement, similar to the way they file their 1041?

Periodically, I will post of the progress and changes your suggestions and comments have given us. Thank you for your support.

Steve Sims, EA
Taxpayers' Rights Advocate