Practical Considerations for Clients Who Invested in QOFs During 2021 (Mar. 3, 2022)

Clients who invested in qualified opportunity zone funds (QOFs) during 2021 should be aware that their tax reporting requirements will likely begin in 2022. Taxpayers who created QOFs during 2021 must file their Form 8996 with the IRS or the IRS will fail to treat the fund as a QOF (meaning that the fund could lose its qualified status). For many clients, that form will be due by March 15. Clients who formed QOFs during 2018, 2019 or 2020 will be subject to their typical annual tax compliance filing requirements this year. Clients who invested in QOFs during 2021 will be required to file Form 8997 with the IRS to make a deferral election (to deter tax liability through December 31, 2026). That form should be filed with the taxpayer's federal income tax return by the April 18, 2022 filing deadline. For more information on the tax treatment and deferral opportunities presented by opportunity zones, visit Tax Facts Online. Q