Reg. §301.9100-2 provides two automatic extensions for taxpayer elections: one blanket 6-month extension and one 12-month extension for specifically listed elections. The term “automatic extension” is in contrast to an extension you must request by a private letter ruling. These requests are not automatically granted and require a user fee. There are times when the IRS provides a revenue procedure you can use instead. For instance, you can request a late S election by using the procedures in Rev. Proc. 2013-30. If the entity fails to meet the criteria as outlined in this revenue procedure, then a private letter ruling is needed.

Six-month extension

Taxpayers who file their return on time have an additional six months from the unextended due date to make elections that are available to taxpayers by the due date of the return including extensions. The return must be filed on time in order to receive an additional six months. If the return is not timely filed, there is no automatic extension.

The automatic extension does not apply to elections that can only be made by the unextended due date, such as electing to treat a contribution made by April 15 to an IRA or HSA as if it were for the prior tax year. We know an election has an additional six months if the election is allowed to be made by the due date of the return including extensions.

When using the automatic extension, write the term “Filed Pursuant to section 301.9100-2” at the top of the document.

The first step in determining how to make any election is to find the IRS instructions on how to do so. The instructions will inform you what is needed in each case. You should also be able to determine whether the election qualifies for an automatic six-month election. If the instructions aren’t clear on this matter, then further investigation may be necessary. Just make sure the election is allowed to be made by the due date of the return (including extensions) before proceeding any further.

Reminder: If an election says it can only be made by the due date of the return (excluding extensions), then the taxpayer does not have an additional six months to make the election.

Let’s take a look at a couple popular items and how to use the automatic six-month extension.

Recharacterize a Roth contribution

Effective for tax years after Dec. 31, 2017, the TCJA eliminated the taxpayer’s ability to recharacterize contributions from a non-Roth IRA to a Roth IRA. Under prior law this type of recharacterization was permissible.

Return of IRA contribution

There are times when a taxpayer would like to have an IRA contribution returned to him or her. As long as this is done by the due date of the return (including extensions), it’s as if the contribution had never been made. Within six months of the unextended due date, the taxpayer (with your help) will do the following:

• Withdraw the contributions, plus earnings (or minus losses).
• File an amended return with “Filed pursuant to section 301.9100-2” written at the top. Report any related earnings on the amended return and include an explanation of the withdrawal. Use Form 1040X, Amended U.S. Individual Income Tax Return, in this case. For a traditional IRA contribution, if a deduction was claimed, this will be moved because the contribution will be treated as having never been made.

Waiving an NOL carryback period

Taxpayers can elect to carry an NOL forward only, instead of first carrying it back. This election is made by attaching a statement to the return indicating that the taxpayer is electing under §172(b)(3) to relinquish the entire carryback period for the NOL generated in the current year. The return must be filed on or before the due date (including extensions).

Taxpayers who filed their return on time and did not make the election can amend the return within six months of the due date (excluding extensions) and attach the election to the amended return. “Filed pursuant to section 301.9100-2” should be written on the election statement.

Twelve-month extension

The regulations also provide for a 12-month extension for certain elections. This extension is available regardless of whether the taxpayer filed a return on time. The 12-month extension begins on the due date of the return; if the taxpayer filed an extension, the extension is 12 months from that extended due date. Unlike the 6-month extension, the 12-month extension is specifically stated in the regulation as applying to the:

• Election to use other than the required taxable year under §444.
• Election to use the last-in, first-out (LIFO) inventory method under §472.
• 15-month rule for filing an exemption application for a §§501(c)(9), 501(c)(17) or 501(c)(20) organization under §505.
• 15-month rule for filing an exemption application for a §501(c)(3) organization under §508.
• Election to be treated as a homeowners association under §528.
• Election to adjust basis on partnership transfers and distributions under §754.
• Estate tax election to specially value qualified real property (where the IRS has not yet begun an examination of the filed return) under §2032A(d)(1).
• Chapter 14 gift tax election to treat a qualified payment right as other than a qualified payment under §2701(c)(3)(C)(i).
• Chapter 14 gift tax election to treat any distribution right as a qualified payment under §2701(c)(3)(C)(ii).

These types of elections are far less common than the ones that will fit under the six-month extension provisions. To illustrate the 12-month automatic extension, let’s take a look at the §754 election and see how it’s done.

Section 754 Election

The §754 election must be made in a statement that is filed with the partnership’s timely filed return (including any extension) for the tax year during which the distribution or transfer occurs. The statement must include:

• The name and address of the partnership.
• A declaration that the partnership elects under §754 to apply the provisions of §§734(b) and 743(b).
• The signature of a partner authorized to sign the partnership return.
• Partnerships that failed to make the §754 election can get an automatic 12-month extension to make the election provided corrective action is taken within 12 months of the original deadline for making the election.

Reminder: The 12-month extension can be made on a non-timely filed return.

To learn more about how make the §754 election, view our Section 754 Election Mechanics on-demand webinar.

Conclusion

In the case of an automatic six-month election, taxpayers who filed their return on time are given an additional six months to make the needed election without being penalized for not filing an extension and having filed their return by the due date. Although limited in scope, For the automatic 12-month extension, an automatic 12-month extension gives taxpayers an additional 12 months to make the needed election; they are afforded this opportunity even if they haven’t timely filed a return.