Late in July, the president signed into law a bill that included new due dates for certain tax returns, including many business returns. These changes will arguably provide a better and more logical flow of information for taxpayers because the information they need to file individual 1040s or 1120s will now be available on time. The law also provides several new extension dates.
The new tax provisions were tucked into an unlikely place -- a short-term highway funding extension. In addition to modified due dates, the bill also contains a number of significant revenue provisions that will impact our clients. Of particular interest are the following:
Consistent Basis Reporting Between Estate and Person Acquiring Property From Decedent
For any estate tax return filed after the date of the new law, inherited property cannot have a higher basis than the basis reported by the estate for estate tax purposes. To ensure an accurate basis is determined, the law also adds a new section (6035) which requires the executor of an estate responsible for filing an estate tax return to also provide information returns to the IRS and to those persons receiving the inherited property.
Overruling of the Supreme Court’s Home Concrete Decision
In a 2012 Supreme Court Case, U.S. v. Home Concrete & Supply, LLC, the IRS lost when the Supreme Court held that the three year statute of limitations applied in matters of capital gains and overstatement of basis. The new law has amended that statute to make it clear that an understatement related to unrecovered cost or other basis “is an omission from gross income.” The change applies to returns filed after the date of the new law and any other returns for which the statute has not yet run.
Tax Return Due Dates
For partnership and S corporation tax returns, the new due date is March 15 for calendar year partnerships and the 15th day of the third month after the close of the fiscal year for fiscal year partnerships. This is a month earlier than the previous due date of April 15.
For C corporation returns, the new due date is the 15th day of the fourth month following the close of the corporation’s year (that would be April 15 for a calendar year end corporation). This is a month later than the previous due date of March 15 for calendar year end corporations.
In both cases (partnership returns and corporate returns), the new law allows for a six month extension with exceptions for certain corporations through 2026. All of these changes apply to returns for tax years beginning after December 31, 2015 with one exception: C corporations with fiscal years ending on June 30 have ten extra years to make the change.
For foreign trust reporting, the due date for filing of Form 3520–A, Annual Information Return of a Foreign Trust with a United States Owner, has been changed to the 15th day of the third month after the close of the trust’s tax year (remember that trusts can have flexible tax years). The due date of Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, for calendar year filers has been changed to April 15.
The most dramatic change is the new due date of April 15 for the FinCEN Report 114 relating to Report of Foreign Bank and Financial Accounts. The old date was June 30 so this is significantly earlier.
Extensions
The new law modifies the time allowable for extension of time to file for several returns:
- Form 1065: 6-month period ending on September 15 for calendar year taxpayers.
- Form 1041: 5½-month period ending on September 30 for calendar year taxpayers.
- Form 5500: automatic 3½-month period ending on November 15 for calendar year plans.
- Form 990 (series): automatic 6-month period ending on November 15 for calendar year filers.
- Forms 4720, 5227, 6069, 8870: automatic 6-month period beginning on the due date for filing the return.
- Forms 3520–A and 3520: 6-month period. And for the first time ever, the FinCEN Report 114 has a 6-month period ending on October 15 (with extension rules similar to those at Treas. Reg. section 1.6081–5).
The new regulations apply to taxable years beginning after 12/31/15. That means, beginning in January, the new regulations will be in effect. The returns you file in 2017 (reflecting 2016’s numbers) must conform to these new rules. Be in discussion with your CPA to make sure you’re in compliance and properly preparing for the new requirements.
