John Finocchario, The Daily Record Newswire
On July 31, President Obama signed into law a highway funding bill which contained many tax provisions that will impact the due dates of certain business tax returns. The provisions will apply to tax years beginning after Dec. 31, 2015. Although the changes will not impact this coming filing season, it is important to be aware of the changes coming for the 2016 tax year.
For quite some time now, the American Institute of Certified Public Accountants has been urging Congress to adjust the due dates for partnership returns in order to improve the coordination between partnership Schedule K-1 reporting and the final reporting on the individual partners Form 1040.
For tax years ending on Dec. 31, 2015 and prior, partnership tax returns were due on April 15, the same deadline as the individuals income tax return. This often caused delays in the individuals filing as they waited to receive their Schedules K-1 from their partnership investments.
With the passing of the H.R. 3236, the Surface Transportation and Veteran Health Care Choice Improvement Act of 2015, the following due dates for business tax returns have changed, effective for tax years after Dec. 31, 2015, to help better improve information flow:
Partnership tax returns, Form 1065, will be due on March 15, rather than April 15. For fiscal year filers, the due date will be the 15th day of the third month following the end of the tax year. This means that partnerships that do not file for an extension of time to file will be required to issue Schedule K-1 to a partner a full month before the partner’s individual income tax return is due. Partnership returns will now be allowed a six month extension of time to file rather than five months. This will mean that extended partnership returns will still be due on Sept. 15.
C Corporation tax returns, Form 1120, will now be due on April 15, rather than March 15. For fiscal year filers, the return will be due on the 15th day of the fourth month following the end of the tax year. Because C Corporations pay an entity level tax and income is not passed through to individual shareholders, individuals do not rely on C Corporations to issue any information necessary to prepare the individual tax return. Therefore, having the same due date as individuals does not cause any disruption in the information flow like we have previously seen with partnerships.
A special rule exists for C Corporations with a tax year ending on June 30. Until 2025, those tax returns will continue to be due on Sept. 15. For tax years after 2025 the returns will be due on Oct. 15.
S Corporation due dates will remain unchanged. They will continue to be due on March 15, or the 15th day of the third month following the end of the tax year, for fiscal year filers.
Another welcomed change in due dates that resulted from the new law, is the due date for FinCEN Form 114. Form 114 (better known as an FBAR) is used to report ownership or signature authority in certain foreign bank accounts. The due date had previously been June 30. This will change to April 15 to better follow the due date of the individual tax return.
There will also be a six-month extension of time to file the return. This will allow, in most cases, for the form to be filed at the same time as the individual’s tax return. It is very important to be aware of this change, as the penalties for failure to file can be quite substantial.
The change in the due dates should be seen as a victory for most taxpayers. The new dates should allow information to get to the individuals in a timelier manner. The hope is that this will result in fewer extended or amended individual and corporate tax returns. While the changes will likely have a positive impact overall to taxpayers, it will be important when planning for the 2016 tax year that these new dates are considered during the planning process.
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John Finocchario, CPA, is a senior manager in the tax department at Mengel, Metzger, Barr & Co. LLP. He may be reached at Jfinocchario@mmb-co.com.
