The Short-term Highway Funding Extension

Ah….Taxes….Don’t we all love them?  Changes in the laws, changes in due dates, changes in exclusions, foreign interactions and so many others.  Well, here’s several more for our exciting clients.  New due dates for the 2017 filing season and some other changes.

On July 31, President Obama signed into a law a bill (The Short-term Highway Funding Extension) that included changes to due dates for certain returns including tax returns and informational returns (such as the FinCEN Form 114 – previously known as the FBAR).  These changes had been proposed by many members of the profession in an attempt to attain a more logical chronology to provide information to taxpayers needed to file their individual taxes and/or lower tier corporations and partnerships tax returns.

One major change that is seen to be a tremendous change for accountants and taxpayers is that partnership tax returns (including LLC’s and LLPs’ treated as partnerships) will need to file one month earlier – March 15 for calendar year partnerships (the 15th day of the third month following the close of the fiscal year for fiscal-year partnerships).  This will clearly help with the flow though of partners K-1 information to be implemented in individual tax returns and lower tier entities.  This was primarily done in the hopes of many individual and lower tier entities not being up against the last minute filing of these tax returns due to awaiting the form K-1 information.

Another significant change is the due date for C-Corporations.  The new due date is a month later – April 15th for calendar year C-corporations (the 15th day of the fourth month following the close of the fiscal year for fiscal-year C-Corporations).  Interestingly, C-Corporations will be allowed a six-month extension, except that calendar-year corporations would get a five-month extension until 2026 and corporations with a June 30 year end would get a seven-month extension until 2026.

The new due dates will apply to returns for tax years beginning after Dec. 31, 2015. However, for C corporations with fiscal years ending on June 30, the new due dates will not apply until tax years beginning after Dec. 31, 2025.

The new due date for FinCEN Form 114 (“FBAR”) is changed from June 30 to April 15, and for the first time taxpayers will be allowed a six-month extension.  This was presumably done with the rationale that most taxpayers would prepare this form at the same time as their income tax returns and thus having the due dates coincide with one another makes it simpler for taxpayers filing either by April 15 or the extended due date (generally October 15).

Lastly, concerning due dates, Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, will be due April 15 for calendar-year filers, with a maximum six-month extension.

Attached is a useful chart highlighted the changes (and some no changes) to due dates.

Some other changes not involving due dates under The Short-term Highway Funding Extension include:

  • Additional information on returns relating to mortgage interest – Form 1098 statements will now be required to report the outstanding principal on the mortgage at the beginning of the calendar year, the address of the property securing the mortgage, and the mortgage origination date. This change applies to returns and statements due after Dec. 31, 2016.
  • Consistent basis reporting between estate and beneficiaries – It’s now mandated that anyone inheriting property from a decedent cannot treat the property as having a higher basis than the basis reported by the estate for estate tax purposes. It also creates a new Sec. 6035, which requires executors of estates that are required to file an estate tax return to furnish information returns to the IRS and payee statements to any person acquiring an interest in property from the estate.  These statements will identify the value of each interest in property acquired from the estate as reported on the estate tax return. The new basis reporting provisions apply to property with respect to which an estate tax return is filed after the date of enactment.
  • Overruling Home Concrete in cases of overstated basis – In Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012), the Supreme Court held that the extended six-year statute of limitation under Sec. 6501(e)(1)(A), which applies when a taxpayer “omits from gross income an amount properly includible” in excess of 25% of gross income, does not apply when a taxpayer overstates its basis in property it has sold.  To be more specific, the Act adds the following language:

“An understatement of gross income by reason of an overstatement of unrecovered cost or other basis is an omission from gross income.” 

The change applies to returns filed after the date of enactment as well as previously filed returns that are still open under Sec. 6501 (determined without regard to the amendments made by the act).

Should you have questions or would like more information on the information provided, please contact our office at 888-556-1154.