Passive investment company won't send K-1 until after October 15th Extension deadline - what now?

If they file using an estimate and it turns out to be way off, wouldn't they still get hit with penalties? Like what if they guess $2000 in income but the K-1 ends up showing $10000?

Great question. If your estimate is substantially lower than the actual income, you could potentially face an underpayment penalty. However, there are a few mitigating factors. First, if you can show you acted in good faith based on the information available, the IRS may waive penalties. Documentation is key here - save that notification from the partnership about the late K-1. You can also consider making a slightly higher estimate than what you think it might be, to provide yourself some buffer. The IRS is generally more concerned with willful underreporting rather than reasonable attempts to comply despite third-party delays.

How accurate was it really? I'm in a similar situation with multiple K-1s and freaking out about the Oct 15 deadline approaching. Did you have to pay for it?

Sounds interesting but I'm skeptical. How does it predict K-1 values if each investment performs differently year to year? Does it work for oil & gas partnerships too? Those K-1s are notoriously complex.

The accuracy really surprised me - it was within about $500 on a $12,000 income amount. It apparently uses some sort of pattern analysis based on prior years and current market conditions for similar investments. Yes, it works for oil & gas partnerships too! My brother used it for his pipeline investment K-1 last year. It handles the complex stuff like IDCs, depletion allowances, and those weird passive loss calculations that oil & gas partnerships have. It actually gave line-by-line predictions, not just the total income.

Wait, I don't understand how this works? The IRS phone system is awful by design. How does this service actually get you through when the IRS phone lines are always saying "due to high call volume, try again later"?

This seems like BS. I've tried everything to get through to the IRS. There's no way some service can magically connect you when their lines are full. They're probably just charging money to call the same number you would call anyway. The IRS doesn't have some secret backdoor line.

The service works by constantly redialing and navigating the IRS phone tree for you. It's not a backdoor or anything sketchy - it basically does the frustrating part for you. When it gets through, it calls you and connects you directly to the agent. It saved me literally hours of being on hold and trying to get through. It's definitely not BS - I was skeptical too. What it does is keep trying the line when most people would give up. The IRS phone system actually does let people through, just not very many at a time. This service basically waits in line for you.

I actually tried that already! Called them twice and they claimed they don't have even preliminary numbers yet because they're "waiting on information from upstream investments" or something like that. Seemed like an excuse to me, but they wouldn't budge.

That's frustrating! In that case, I agree with the other suggestions about estimating based on last year. One thing to add - make sure you document your attempts to get the information. Save emails, note dates of phone calls, etc. This creates a paper trail showing you made good-faith efforts to report accurately. If your investment is with a larger company, try escalating to a manager or investor relations. Sometimes the frontline support people just give standard answers, but someone higher up might be more helpful.

Does this statement need specific formatting or can you just type it up and include it with your return? If filing electronically, where do you attach this explanation?

For electronic filing, you can usually attach the statement as a PDF in the "Additional Forms" or "Supporting Documents" section of your tax software. If your software doesn't have that option, you can include the explanation in the "Other Information" field on Form 1040 or add it as a rider statement. For paper filing, just staple it to your return. Keep it simple - one page explaining the situation, the partnership's name and EIN, and that you're using good faith estimates. The IRS just wants to see you made a reasonable effort to comply despite the third party delay.