2016 Tax Return Filing Update
As a result of the U.S. presidential election, there now seems to be daily speculation about how the Internal Revenue Code (Code) will be revised and who will be the winners and losers from a tax policy perspective. While this is certainly interesting (at least to tax advisors), we thought a reminder about several important changes that were enacted regarding tax return filing obligations would be helpful since these changes are now in effect for 2016 tax returns.
These changes impact a variety of U.S. business entities including partnerships (as well as limited liability companies taxed as partnerships), S corporations, C corporations, and trusts. The changes also revise the due dates for important information returns including the reporting for offshore accounts (commonly known as the FBAR filing). Our focus is on how these rules impact the 2016 tax return filing obligations of calendar year taxpayers (some special rules apply for fiscal year taxpayers).
Partnerships and S Corporations
A partnership previously filed Form 1065 by April 15th while an S corporation filed Form 1120S by March 15th. Individuals having an interest in a partnership often needed to put their individual returns on extension because the partnership due date of April 15th meant that they did not have sufficient time to review and analyze the K-1 from the partnership and include that information on their returns in time to file by April 15th.
The tax legislation now conforms the return filing dates for both S corporations and partnerships with partnerships having a due date of March 15th instead of April 15th (with no change to the March 15th S corporation return due date).
For an S corporation, the extended time to file a tax return is six months, making the extended due date September 15th. A partnership previously could extend the time to file for five months (from April 15th to September 15th). Given that partnerships are now required to file a return by March 15th, the tax legislation instructed the Internal Revenue Service (IRS) to revise its regulations to provide for a six month extension (from March 15th), which then maintains the September 15th extension date for partnerships.
C corporations previously filed Form 1120 by March 15th. Under the tax legislation, a C corporation will now file its tax return by April 15th. Under a special transition rule, a C corporation with a fiscal year ending on June 30th will not be subject to a new deadline until tax years beginning after December 31, 2025.
C corporations had an automatic three month extension to file under the Internal Revenue Code (Code) and a six month automatic extension to file under the regulations. The tax legislation incorporates an automatic six month extension into the Code, but then defers the implementation of the six month extension until 2026 for calendar year taxpayers. Until then, returns can be extended until September 15th.
Trusts that file Form 1041 will continue to have an April 15th filing date, but the prior five month extension to file is now five and a half months so that returns can now be extended to September 30th.
Exempt organizations that file Form 990 (or any series of that Form) will have a due date of May 15th, but the automatic extension has increased from three months to six months, meaning that the extended due date is now November 15th.
The rules for reporting foreign financial accounts on FinCEN Report 114 (previously Form TD F 90-22.1) have changed substantially. Under the former rules, a taxpayer was required to file Report 114 so that it was received (not simply filed) by June 30th. No extensions were allowed.
As a result of the tax legislation, the due date for Form 114 is now April 15th, but a taxpayer can obtain a six month extension of time (until October 15th). In addition, the IRS can waive any penalty for the failure to timely request or file an extension provided that the failure relates to a taxpayer who is a required to file Report 114 for the first time.
These tax return reporting changes should allow individuals with interests in pass-through entities to send their K-1 information to their tax preparers in a more organized and efficient manner and (hopefully) file their federal tax returns without the need for an extension.
Form W-2, Form W-3 and Form 1099-MISC
In separate tax legislation, the filing deadline for 2016 Forms W-2 and W-3 (including other series of these Forms) is now January 31, 2017 irrespective of whether the Forms are filed on paper or electronically. In addition, Form 1099-MISC must be filed by January 31, 2017 if nonemployee compensation is being reported in box 7.
For questions or guidance on how these changes may affect your business, please contact John Eagan (firstname.lastname@example.org; 212.868.4835), Kevin Koscil (email@example.com; 215.864.6827) or another member of our Tax and Estates Group.