Taxpayers who may need to take additional actions related to qualified opportunity funds (QOFs) should begin receiving letters in the mail in April. the IRS announced Tuesday.
The IRS said it will begin sending letters this month to taxpayers, including corporations or partnerships organized as a QOF, whose Form 8996, Qualified Opportunity Fund, lacks proper certification information. Taxpayers with a missing, incorrect, incomplete, or invalid certification of the investment standard may receive Letter 6501, Qualified Opportunity Fund (QOF) Investment Standard, the IRS said.
Other, similar letters the IRS may send where taxpayers have not properly complied with the instructions for Form 8997, Initial and Annual Statement of Qualified Fund (QOF) Investments, are Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, or Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments.
Taxpayers receiving any of these letters may need to take corrective action, the IRS advised, including filing an amended return or, if a partnership, an administrative adjustment request, with a proper Form 8996 or Form 8997 attached. If they do not, the QOF entity may be referred for examination, as may investors who made an election to defer tax on eligible gains invested in the entity, the IRS advised. In such cases, they may owe taxes, interest, and penalties on gains not properly deferred.