09 Dec New Return Due Dates: A Timely Topic
Finally, A Commonsense Order
They did it. Congress passed, and Obama signed into law, legislation that changes the due dates for some income tax returns. Now, for the most part, flow-through returns will be due *before* tax paying returns!
W-2s and Nonemployee compensation 1099s
To help get information to the IRS sooner, the Protecting Americans from Tax Hikes Act (the PATH Act) accelerates the due dates for W-2 informational returns and the appropriate 1099 form for reporting nonemployee compensation. Formerly, Forms W-2 and W-3 were required to be filed with the Social Security Administration by February 28 of the year following the calendar year in which the wages were paid. Nonemployee compensation paid to certain US payees had to be reported to the IRS on Form 1099 by the last day of February following the calendar year in which the compensation was paid. If filed electronically, the extended due dates were March 31. The PATH act, signed into law at the end of 2015, will now require Forms W-2, W-3 filed with the SSA and the appropriate Form 1099 filed with the IRS by January 31 of the year following the calendar year in which the wages or compensation were paid. The extended March 31 due date for electronic filers is no longer available.
The due date for furnishing copies of these forms to employees and payees remains January 31.
This change makes sense because many people file their income tax returns as soon as they receive their W-2, and the IRS had to process these returns and refund claims without having all of the third-party payor information to match with the returns, making it easy to file fraudulent returns and receive refunds.
Hopefully the new due dates are not an inconvenience. Modern payroll systems allow for preparing the necessary forms in early January, and I suggest getting these forms to employees and nonemployees by the 15th, then waiting a couple of weeks for feedback to see if any corrections are needed. Then, file the forms with the appropriate agencies by January 31.
De Minimis 1099 Safe Harbor
The PATH Act also includes a safe harbor for de minimis errors on information returns, payee statements, and withholding. Generally, failure to include all the required information on an information return is subject to penalty. The PATH act creates a de minimis safe harbor of $100 ($25 for withholding). Accordingly, an error on the information return does not need to be corrected if the error for any single amount does not exceed $100 ($25 for withholding). However, the failure to file a correct information return and the penalty for failure to furnish a correct payee statement continue to apply if the payee statement recipient requests a corrected statement.
New Income Tax Return Due Dates
On July 31, 2015, President Obama Signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act. This Act changed the due dates for some income tax returns affecting the 2017 filing season. Here are the highlights:
1065 Partnership Returns –*Change* – Previously, the due date was April 15 with an extended due date of September 15. Now, the due date will be March 15 with a September 15 extended due date.
1120S S-Corporation Returns – *No Change* – The due date remains March 15 with an extended due date of September 15.
1041 Trust and Estate Returns –*Change* – Previously, the original due date was April 15 with an extended due date of September 15. Now, the original due date is still April 15, but the extended due date is pushed back to September 30.
1120 (C-Corporations) –*Quirky Changes* – This is where it gets tricky.
Calendar Year C-Corps (December 31 Year End) – Previously, the original due date was March 15 with an extended due date of September 15. Now, the original due date is April 15 with an extended due date of September 15. *But* – After December 31, 2025, the extended due date will be October 15.
Fiscal Year C-Corps with a June 30 Year End – Previously, the original due date was the 15th day of the third month following the close of the fiscal year (i.e., September 15). Now, the original due date will continue to be the 15th day of the third month following the close of the fiscal year, but beginning with fiscal years beginning after December 31, 2025, the original due date will be the 15th day of the 4th month following the end of the fiscal year. So, this change will occur when these filers end their fiscal year on June 30, 2027 (Their first fiscal year beginning after December 31, 2025 will begin on July 1, 2026). The extended due dates will be 7 months after the original due date for Fiscal Year Ends before June 30, 2027. For Fiscal Year Ends after June 30, 2027, the extended due date is 6 months after the original due date.
Fiscal Year C-Corps with Other than June 30 Year End – If the fiscal year begins before December 31, 2015, then the corporation’s original due date is the 3rd month following the close of the fiscal year. If the fiscal year begins after December 31, 2015, then the original due date is the 4th month following the close of the fiscal year. So, a corporation that ended their fiscal year on August 30th, 2016, will have an original due date of November 15, 2016. Next year, however, the due date will be December 15, 2017. The extended due date will be 6 months after the original due date.
Why the quirkiness? Well, Congress wanted the changes to be revenue neutral. The government works on a September 30 fiscal year end, so the government wanted to be able to accrue some tax revenue.
1040 Individual returns –*Change* – These returns are still due April 15 with an extended due date of October 15.
FinCEN 114 (Foreign Bank Account) –*Change* – Previously these were due June 30th with no extension. Now they are due April 15 with an extended due date of October 15.
Overall, I like the new changes. There is a more logical flow, and incorporating FinCEN 114 into the 1040 filing process is going to make these returns much more manageable. Of course, there will be a learning curve both for clients and practitioners.