Opportunity Zone Funds with wrong paperwork to get IRS letters

Qualified opportunity funds that sent sketchy backup documents with their Form 8996 will soon be getting letters from the IRS.

Taxpayers who attached a Form 8996, “Qualified Opportunity Fund,” to their return may receive IRS Letter 6501, “Qualified Opportunity Fund Investment Standard.” The letter lets them know that information to support the annual certification of investment standard is missing or invalid, or that the calculation isn’t supported by the reported amounts.

Taxpayers may also get IRS Letter 6502, “Reporting Qualified Opportunity Fund Investments,” or Letter 6503, Annual Reporting Of Qualified Opportunity Fund Investments.” These letters notify them that they may not have followed the instructions for their Form 8997, “Initial and Annual Statement of Qualified Opportunity Fund Investments.”

Entities that want to maintain their certification as a QOF may need to file an amended return or an administrative adjustment request. Those that do nothing may have the IRS refer their tax account for examination. Investors who made an election to defer tax on eligible gains invested in that entity may also be subject to exam.

For more, visit the IRS Opportunity Zones page.