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 2015,1 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).
First, as a result of preliminary feedback from government officials that the individual tax return due date of April 15 and extension until Oct. 15 were "cut in stone," tax practitioners did not propose that individual tax return due dates change, and they did not change.
Second, the new federal due dates apply to 2016 tax returns and the 2017 filing season and beyond. However, it should be noted that the new rules apply to tax years beginning after Dec. 31, 2015, so they will apply to short-year returns beginning in 2016, before the general 2017 filing season. For example, if during its tax year beginning in 2016, a partnership has a technical termination, or a corporation goes out of existence or changes its tax year sometime in 2016, the new due dates would apply to the entity's short-period return.
Below is a list of the new federal due dates generally applicable for 2016 tax returns (2017 filing season) and beyond.2
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).
Note: Calendar-year C corporations can get extensions until Sept. 15 until tax years beginning after 2025, when the extended due date will be Oct. 15. [Editor's note: The preceding sentence reflects the statute as enacted. In the December 2016 instructions to Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, and on its website, the IRS has confirmed that it is allowing six-month extensions for calendar-year C corporations.] June 30 fiscal-year-end C corporations (returns due Sept. 15) can get extensions to April 15 until tax years beginning after 2025; after 2025, June 30 fiscal-year-end C corporations will have an Oct. 15 due date and can get extensions until April 15.
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.
Note: The Form 5500 extension due date of Oct. 15 remains unchanged. The Surface Transportation Reauthorization and Reform Act of 2015,3 signed into law on Dec. 4, 2015, repealed the employee benefit plan Form 5500 extension provision in the July 2015 highway bill, which had provided a 3½-month filing extension until Nov. 15. As requested by the U.S. Department of Labor, the result of the Form 5500 extension provision in the December 2015 Act is that the Form 5500 extension is back to 2½ months, due on Oct. 15. Note that there was a negligible revenue effect from the Form 5500 due date extension as no tax payments are made with filing this return.4Other 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.
Many 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.5 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 Dates
As 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.7
Specifically, since January 1997, when the check-the-box8 regulations became effective and "eligible" entities found it easier to file as partnerships, the formation of new limited liability companies (LLCs), limited liability partnerships, and similar state law entities (collectively, LLEs) resulted in a dramatic increase in the number of partnership returns being filed. Understandably, this situation increased the number of individuals and entities, including C and S corporations, and trusts and estates, relying on information from partnerships and other flowthrough entities in determining taxable income.
In addition to the increase in the number of flowthrough entities, the AICPA Tax Division observed that the use of tiered partnership structures also increased over the past decade—and with it the complexity of tax compliance—by vehicles such as hedge funds, master limited partnerships, business trusts, series LLCs, and private equity. Further, the increased complexity of the Code and other tax laws has resulted in the need for significantly greater information gathering and analysis. In this new environment, practitioners and taxpayers often found that the prior-law ordering of tax return due dates for partners (i.e., individuals, C corporations, S corporations, trusts, or other partnerships) and partnerships made the timely filing of complete and accurate returns difficult. In far too many cases, the ultimate owner of a partnership interest did not obtain the information needed to prepare tax returns on a timely basis. Increasingly complex partnership transactions and reporting requirements added to return preparation time as additional time for analysis has been needed to ensure accuracy.
The interconnection of business entities and those who own them demanded a more logical flow of information between parties. Individuals, C corporations, S corporations, trusts, and other partnerships often are investing in, or operating, partnerships and, if they do, require Schedules K-1 (Form 1065) before completing their returns. Many partners often have been forced to seek extensions, a matter further complicated by the fact that partnerships themselves sometimes also seek extensions.
The AICPA advocated for this change in the due dates to:
- Address many of the problems that had been facing taxpayers and tax professionals;
- Improve the tax return filing process;
- Improve the accuracy of tax and information returns by allowing corporations and individuals to file using current data from flowthrough returns that have already been filed rather than relying on estimates;
- Better facilitate (versus the prior-law system mismatch of) the flow of information between taxpayers (i.e., corporations, partnerships, and individuals);
- Promote earlier filing of more business and individual returns and reduce the need for extended and amended corporate and individual tax returns;
- Enable earlier filing of final flowthrough returns as tax resources can be redirected from non-publicly traded C corporations to flowthrough entities, whose returns would be due well in advance of those corporations; and
- Significantly simplify tax administration for the government, taxpayers, and practitioners.
The new law, which has the partnership Form 1065 as the first return due, is both logical and helpful to many types of entities because all other entities and individuals can be partners in a partnership and thus may need (and will have starting in the 2017 filing season) information from Schedules K-1 from partnership investments to timely and accurately complete their tax returns. Note that practitioners and partnerships that need more time to complete the partnership tax return will still be able to extend the return until Sept. 15.
Once partnership and S corporation returns have been filed by March 15, and owners have received their Schedules K-1, individuals, trusts, and C corporations will have the information they need from their passthrough entity investments to file accurate and timely returns. Trusts will have two more weeks after receiving extended partnership and S corporation Schedules K-1 to complete their extended returns and issue their extended Form 1041 Schedules K-1 to beneficiaries, who will have an additional two weeks to complete their extended personal returns. In addition, taxpayers with foreign accounts will have all the information needed to complete FinCEN Form 114 at the same time as the individual tax return due date and extension.
C corporations will largely benefit from the new due dates of April 15 and Oct. 15 (calendar-year corporate extensions change to Oct. 15 after 2025).9 Many C corporations previously needed to extend their returns because they were waiting on audited financial statements, which typically arrive by the end of March. These corporations may no longer need to extend the income tax return, filing by the new original due date of April 15 (or the 15th day of the fourth month following the close of the tax year for most fiscal-year corporations). Note that the due dates for estimated tax payments do not change.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.
As the AICPA developed the legislative proposal, it became apparent that a due date change to achieve most of the desired outcomes would mean shorter deadlines for some entities and extended due dates for others. Some members may experience "growing pains" as they work to retrain their clients and reorder some of their internal staffing. However, the hope is that over a short period of time, CPAs and their clients will be able to adjust to the new filing dates and that extensions may help practitioners balance all the returns they need to file. Overall, the new law should produce a more logical flow of information for practitioners and clients.
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.
In addition to the improved logical flow of information, practitioners who file Forms 990 will find the extension process to be simplified, eliminating the need to file two extension requests.
Over the next year, the IRS should be updating the relevant regulations as the legislation instructs the Service to modify existing regulations and provide guidance for implementing the new due dates. Practitioners may want to review the forthcoming guidance when the IRS releases it.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 Dates
Currently, 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.AICPA Advocacy Efforts on Late and Amended Forms 1099
The AICPA advocated successfully for legislation to assist with resolving the increasing issuance of late and amended Forms 1099. The AICPA suggested and commented on several legislative proposals (in September 2015, December 2014, January 2014, and April 2013),10 and Congress recently enacted several of these AICPA-supported provisions as part of the Protecting Americans From Tax Hikes (PATH) Act of 2015.11 Below are details of the provisions that Congress enacted.De Minimis Threshold Safe Harbor
The AICPA suggested a threshold of at least $50 for de minimis errors,12 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.
AICPA advocacy efforts on the de minimis legislation in 2015 included working with Rep. James Renacci, R-Ohio, on the Information Reporting Simplification Act of 2015, H.R. 3856, which was introduced Oct. 28, 2015. The bill was similar to the final provision that was recently enacted and provided a safe harbor for de minimis errors on information returns and payee statements (i.e., errors of no more than $100 ($25 for tax reported withheld) that would be considered as correct, and no amended forms would need to be filed).
In addition, the Senate Finance Committee's September 2015 proposal also included the same AICPA-supported safe harbor enacted as part of the PATH Act for de minimis errors on information returns, payee statements, and withholding. The AICPA is pleased that Congress enacted safe-harbor provisions for de minimis errors on information returns.Acceleration of Due Dates for Filing Information Returns
The AICPA supported—and Congress recently enacted—as part of the PATH Act, an accelerated due date to the SSA and IRS for Form W-2.13 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.
In 2014 and 2015 comments, the AICPA generally supported the acceleration of the due dates for filing the information returns with the IRS, including Forms W-2, W-3, Transmittal of Wage and Tax Statements, and 1099-MISC.14 However, the AICPA is concerned about the use of a single deadline (e.g., Feb. 21) for all information returns. To provide more flexibility, the Senate Finance Committee's September 2015 proposal included the AICPA-recommended requirement for the payer or employer to file all information forms with the IRS within 15 days of the due date to taxpayers.
It should also be noted that prior to the recent legislation, on Aug. 31, 2015, in an effort to assist with employers providing more timely Forms W-2, the IRS issued final and temporary regulations15 and proposed regulations,16 stating that, starting in 2017, it will no longer allow automatic extensions of forms in the W-2 series (except Form W-2G, Certain Gambling Winnings). The temporary regulations allow only one 30-day nonautomatic extension for Forms W-2. The AICPA-supported enacted legislation was still needed and will no longer allow a later filing date for electronically filed returns.Next Steps for Implementing the Legislation
The tax return due date legislation and de minimis safe harbor for Forms 1099 and acceleration of the Form W-2 due date were major successes for the profession and will benefit many taxpayers and practitioners for years to come. During the remainder of 2016, the IRS will be issuing revised regulations and guidance clarifying and implementing the legislation. State legislatures have started to and are likely to continue to enact legislation and state revenue departments to issue regulations and guidance to follow the federal due date changes.
Taxpayers and practitioners should start planning for and advising clients about providing timely information to meet the new due dates for the 2017 filing season for 2016 tax returns. The Tax Policy & Advocacy Group will continue to listen to, and work with, members to advocate for additional ways to simplify and make the tax system better for taxpayers and practitioners. As taxpayers and practitioners finish getting through this current 2016 filing season and extensions period, it is good to know that there is an end in sight—the new due dates will provide a more logical flow of information and will be in effect for the 2017 filing season.
1Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, Title II, Section 2006. The provision in the legislation to change the filing due dates of certain tax and information returns was estimated by the Joint Committee on Taxation to cost $285 million over the 10-year period 2015-2025, with an estimated $1.472 billion lost in the first year of return filing with the new due dates, and then much of the revenue raised coming from an estimated $1.934 billion raised in 2025, the last year of the budget period window (JCX-106-15).
3Surface Transportation Reauthorization and Reform Act of 2015, P.L. 114-94.
4See Joint Committee on Taxation, Estimated Revenue Effects of the Revenue Provisions Contained in the Conference Agreement for H.R. 22, The "Fixing America's Surface Transportation ('Fast') Act" (JCX-140-15) (Dec. 3, 2015).
5Ala. S.B. 263; Ariz. S.B. 1288; Fla. H.B. 7099; Ga. H.B. 742; Md. H.B. 484; Miss. H.B. 461; N.H. H.B. 1290; N.M. H.B. 249; N.Y. S.B. 6409; Okla. H.B. 2775; Ore. H.B. 4025; S.C. H.B. 4328; Utah H.B. 39; W. Va. S.B. 349, H.B. 4148.
8Regs. Secs. 301.7701-1 through 301.7701-3.
9The 10-year delay in the calendar-year C corporation extended due date change from Sept. 15 to Oct. 15 (and the 10-year delay in changing the original due date for June 30 C corporations from Sept. 15 to Oct. 15) is due to the 10-year budget window Congress uses for revenue estimates of legislation, and the government's desire to collect the needed revenue from C corporations before the government's fiscal year end of Sept. 30.
10See AICPA letter to Sen. Orrin Hatch, R-Utah, and Sen. Ron Wyden, D-Ore. (Sept. 15, 2015); AICPA letter to Wyden and Hatch (Dec. 8, 2014); AICPA letter to Sen. Max Baucus, D-Mont., and Hatch (Jan. 16, 2014); and "Written Testimony of Jeffrey A. Porter on Behalf of the American Institute of Certified Public Accountants," Senate Finance Committee Public Hearing on Tax Fraud, Tax ID Theft and Tax Reform (April 16, 2013).
11Protecting Americans From Tax Hikes (PATH) Act of 2015, enacted as part of the Consolidated Appropriations Act, 2016, P.L. 114-113.
12See AICPA letter to Sen. Ron Wyden and Sen. Orrin Hatch (Dec. 8, 2014).
13See AICPA letter to Sen. Orrin Hatch and Sen. Ron Wyden (Sept. 15, 2015).
14See AICPA letter to Sen. Orrin Hatch and Sen. Ron Wyden (Sept. 15, 2015); AICPA letter to Sens. Max Baucus and Hatch (Jan. 16, 2014).
|To help members who may have questions about the new due date changes, the Tax Division has developed resources, including a chart of the due dates and a PowerPoint presentation and an archive of the free special Washington Tax Brief webcast held on Sept. 16, 2015, to further assist and communicate the changes for the 2017 tax filing season. See a summary chart of the new due dates, available here; charts tracking states' conformity with federal corporate and partnership due dates, available here and here, respectively; a sample client letter, available here (AICPA member login required); an AICPA Washington Tax Brief presentation, available here; and an archived webcast, available here.
|Eileen Sherr is an AICPA senior technical manager–Tax Policy & Advocacy in Washington.|