As practitioners get ready for the 2017 filing season, there is hope that next year will be better. That is because the 2017 filing season will involve new due dates, a result of years of advocacy by the profession. In one of the most significant pieces of tax legislation enacted in 2015, Congress included the AICPA-supported tax return due dates legislation as a revenue provision in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which extended the Highway Trust Fund for three months in the summer and fall of 2015. On July 31, 2015, President Barack Obama signed that legislation into law, making the new tax return due dates generally effective for tax years beginning after Dec. 31, 2015 (applicable to 2016 tax returns and the 2017 filing season).
Below is a list of the new federal due dates generally applicable for 2016 tax returns (2017 filing season) and beyond.
March 15 (Extensions Until Sept. 15)
- Form 1065, U.S. Return of Partnership Income; and
- Form 1120S, U.S. Income Tax Return for an S Corporation.
Note: This is the due date for the tax return and also for the Schedules K-1 that the entity must provide to its owners.
April 15 (Extensions Until Oct. 15, Unless Noted Below)
- Form 1040, U.S. Individual Income Tax Return;
- Form 1041, U.S. Income Tax Return for Estates and Trusts (extensions until Sept. 30);
- Form 1120, U.S. Corporation Income Tax Return (extensions until Sept. 15 until 2026, see note below); and
- FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (any late filing penalty for a first-time filer may be waived).
May 15 (Extensions Until Nov. 15)
- Form 990, Return of Organization Exempt From Income Tax (series).
July 31 (Extensions Until Oct. 15)
- Form 5500 for employee benefit plans.
Other Forms That May Be Affected
Although the legislation does not go into detail about due dates for various other forms, it should be noted that forms that are tied to the due dates of the above forms will need to be revised accordingly. For example, Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, will likely be changed to coincide with the corresponding return’s new due date. Some other forms that are likely to be changed to go along with the corresponding return’s new due date are:
- Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation;
- Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code);
- Form 8804, Annual Return for Partnership Withholding Tax (Section 1446);
- Form 8805, Foreign Partner’s Information Statement of Section 1446 Withholding Tax;
- Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities;
- Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships; and
- Form 8886, Reportable Transaction Disclosure Statement.
State Tax Return Due DatesMany states are likely to follow the above federal due date changes but may need to enact legislation (or issue regulations or guidance from the state departments of revenue) to change their due dates to conform to the new federal dates. As of this writing, due dates conformity legislation had been enacted in Alabama, Arizona, Florida, Georgia, Maryland, Mississippi, New Hampshire, New Mexico, New York, Oklahoma, Oregon, South Carolina, Utah, and West Virginia. California is considering due date legislation.6 During 2016, the state CPA societies likely will be working with their legislatures and departments of revenue on any needed and desired state due date changes before the 2017 filing season implementation of the federal due date changes.
In particular, states should consider making sure the state corporate tax return is not due before the new federal corporate due date of April 15. Otherwise, CPAs may need to prepare state tax returns based on incomplete federal information. Also, states may want to consider aligning the partnership due dates to the new federal due date of March 15.
States that might want to consider changes to the state corporate tax return due date include Illinois, Massachusetts, New Hampshire, Ohio, and Wisconsin, as well as the District of Columbia. Some states, such as Alabama, may require only a regulatory rule or guidance change from the state revenue departments to change their due dates.
The Problem With the Prior-Law Due DatesAs part of the AICPA Tax Division advocacy process, in 2008, members started voicing concerns that taxpayers and preparers were struggling with problems created when flowthrough entities’ Schedules K-1 arrived late, sometimes within days (before or after) of the extended due date of their partners’/owners’ personal returns and up to a month after the extended due date of their partners’/owners’ business returns. Late Schedules K-1 made it difficult, if not impossible, to file a timely, accurate return. The Tax Division found that much of the issue related to late Schedules K-1 were a result of the increasing quantity and complexity of flowthrough entities.
What Does It Mean for Practitioners and Taxpayers?
Workload compression was a major consideration for the member-driven Tax Division in working toward a more logical flow of information between taxed entities. In developing its ultimate proposal, the Tax Division surveyed more than 30,000 AICPA members and worked closely with a task force, several technical resource panels, and many state societies. In the end, it became clear that based on the IRS’s administrative constraints, a perfect solution (for all practitioners and taxpayers) would not be possible; however, taken as a whole, the AICPA thinks that the new law is better than the prior-law due dates.
For the 2017 filing season and beyond, taxpayers and practitioners should start to see that they have timely and accurate information needed from flowthrough entity Schedules K-1. Taxpayers and practitioners should no longer need to deal with so many estimates, extensions, and amended returns. The tax return preparation process should be smoother and more efficient.
Practitioners preparing extended Form 1041 trust and estate income tax returns will welcome the additional two weeks to Sept. 30 (compared with the current Sept. 15 extended deadline) to complete extended Forms 1041. This trust delayed extension date (and the eventual Oct. 15 corporate extension) will also help in spreading the current nightmare of Sept. 15 extensions workload for many practitioners.
Taxpayers with foreign bank accounts will be able to file their FinCEN Report 114 when they have the information needed and are filing their personal income tax return, including being able to extend it until Oct. 15. This is a welcome change from the former June 30 deadline that was unrelated to any other tax deadline and did not allow extensions.
The Continuing Issue of Late and Amended Forms 1099
The AICPA advocated on another due date-related issue. Many brokerage firms have been issuing late and amended Forms 1099, which has become an increasing problem and a frustration for taxpayers and practitioners as they often require filing an amended return. This unfortunate trend has prompted some taxpayers to wait until they receive their anticipated corrected Forms 1099 before taking their tax records to their CPA. The result is that many taxpayers provide tax return data to preparers later than in prior years to avoid having to file amended returns.
This trend forces tax preparers to navigate an increasingly compressed filing season in which they sometimes receive necessary information less than two weeks before the initial filing due date. Late Forms 1099 create anxiety, confusion, and potential complications in the tax preparation process, and, for some taxpayers, they can cause increased tax preparation fees.
Taxpayers often request the practitioner prepare an amended Form 1040 immediately upon receiving a corrected Form 1099 either to make certain they do not owe any late-payment penalties or to obtain their refund as soon as possible. Taxpayers also are often eager to get the current-year tax return filed without extensions, if possible.
Form 1099 Due DatesCurrently, Forms 1099 (e.g., Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, and Form 1099-DIV, Dividends and Distributions) generally are due to the IRS and Social Security Administration (SSA) on Feb. 28 (March 31 if filed electronically) and are due to taxpayers by Jan. 31 (Feb. 15 for Forms 1099-B, 1099-S, Proceeds From Real Estate Transactions, and 1099-MISC, Miscellaneous Income (if amounts are reported in box 8 or 14)). Several brokerage firms have been able to get extensions. Brokerage firms can amend and issue corrected Forms 1099 at any time.
De Minimis Threshold Safe Harbor
The AICPA suggested a threshold of at least $50 for de minimis errors,and Congress recently enacted as part of the PATH Act an increased de minimis threshold (errors up to $100 in income and $25 of withholding) for Forms 1099 and other information returns. Under this provision, information returns, with an error of no more than $100 in income, or an error of no more than $25 in withholdings or backup withholding, will be considered as having been filed with the correct information. This threshold will help with preparers’ workload issues by eliminating amendments for small amounts. It also should help prevent identity theft because it allows brokers to provide Forms 1099 more quickly and efficiently so the taxpayer can file a return sooner, before an identity thief files using the taxpayer’s name. Some taxpayers refuse to file their return early simply because they know they will receive a corrected Form 1099 for a few dollars.
Acceleration of Due Dates for Filing Information ReturnsThe AICPA supported—and Congress recently enacted—as part of the PATH Act, an accelerated due date to the SSA and IRS for Form W-2. The provision, which is effective for 2016 tax returns and the 2017 filing season, requires that these information returns be filed with the SSA and IRS by Jan. 31, generally the same date as the due date for employee and payee statements, and are no longer eligible for the extended filing date for electronically filed information returns.