In an effort to minimize taxpayers’ timing difficulties with filing dates for several common types of returns and reporting forms, the United States Congress has passed legislation modifying the original and extended due dates for tax years beginning after December 31, 2015 (i.e. 2016 returns filed during the 2017 filing season). Click here to view a table that summarizes the old due dates under prior law and the new due dates for some of the most common returns for taxpayers with a calendar tax year-end and C corporations with a fiscal tax year-end.
Summary of key changes for federal filing deadlines
Filing due date changes for partnerships and C corporations
The filing deadline for partnerships and limited liability companies is accelerated one month from the 15th day of the fourth month after year-end to the 15th day of the third month after year-end. Thus, a calendar-year partnership must file its tax return by March 15 instead of April 15.
The filing deadline for C corporations (for tax years ending on a date other than June 30) is deferred one month from the 15th day of the third month after year-end to the 15th day of the fourth month after year-end. Thus, a calendar year C corporation must file its tax return by April 15 instead of March 15. For C corporations with a tax year ending June 30, the application of the new due date rules, oddly, will be delayed for ten years until 2026. Thus, for now, C corporations with a tax year ending June 30 must continue to file their returns by the 15th day of the third month after year-end (i.e. September 15).
Extension period changes for various returns
Under the current tax return filing system, a C corporation can obtain an automatic six-month extension to file its return by filing Form 7004 and paying the estimated tax due by the original due date of its return. A partnership can use the same procedures to obtain an automatic five-month extension.
With the implementation of the new return filing rules, the automatic extension period is reduced to five months for calendar year-end C corporations and increased to seven months for C corporations with a June 30 year-end. The current automatic extension period of six months is unchanged for all other fiscal year-end C corporations. Under the new rules, the automatic extension period for partnership returns has increased from five months to six months.
Estate and trust returns will have a maximum extension of five and a half months under the new law (under the old law, it was five months). The extension will end on September 30 for calendar-year taxpayers.
For exempt organizations, the extension under the new law will be a single, automatic, six-month extension, eliminating the need to process the current first 90-day extension.
Filing due date change for Foreign Bank and Financial Accounts Report (FBAR)
Under current law, FBARs must be filed annually on or before June 30 of the year following the calendar year being reported. There is no extension of time available for filing an FBAR, and the extension of time to file federal tax returns does not extend the time for filing an FBAR. The civil penalties for a non-willful violation can be up to $10,000 per violation, and a willful violation can be up to the greater of $100,000 or 50 per cent of the amount in the account at the time of the violation.
Under the new law (effective for the 2016 taxation year), the FBAR deadline will be moved forward to April 15, thereby aligning the timing of the reporting requirement with that for income tax returns filed by individuals and C corporations. As with income tax returns, taxpayers will be permitted to extend FBARs up to six months for a final deadline of October 15. (At this time, the format for requesting an extension has not yet been released.) Moreover, there will be relief available and penalties may be waived for first-time filers who miss the extension deadline or fail to make an extension request.
Impact of filing deadline changes for taxpayers
More accurate and timely returns filed by investors
In general, the new return filing rules create a more rational and streamlined tax return filing system. By moving the filing deadline for partnerships up one month and the filing deadline for C corporations back one month, partnerships will now have a filing deadline that is one month earlier than the filing deadline for most of their partners (individuals, trusts, C corporations, etc.), allowing them time to provide Schedule K-1 to their partners before the partners’ filing deadlines. The partners will have the information they need from their pass-through entity investments to file accurate and timely returns involving fewer estimates, extensions and amendments.
Fewer extensions required for C corporation filings
The due date changes should reduce the number of taxpayer extensions. C corporations will largely benefit from the changes. Calendar-year C corporations will have one extra month to file their returns. Many C corporations have needed to extend their returns under the previous rules because they were waiting for audited financial statements, which typically arrive by the end of March. These corporations may no longer need to extend their income tax returns and may be able to file 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).
Timing for FBAR filing
With the filing deadline for FBARs moving forward, taxpayers who wish to file their tax returns and FBARs in time for the April 15 deadline should note that the foreign bank and financial account information must now be obtained earlier than usual, as FBARs are technically due earlier under the new system. The ability to request a six-month extension may mitigate some of the timing issues, but taxpayers will now have to determine by April 15 whether they will need an extension because they might have had a reportable financial interest in or signatory authority over a foreign account in the prior calendar year.
In addition, the detailed mechanism of extension filing should be examined carefully to ensure compliance. The grant of authority to waive penalties for first-time filers also provides welcome relief, but FBAR filers should review the procedures and implications for requesting such relief.
State conformity
Many states are likely to follow the federal due date changes or may need to enact legislation to change their due dates to conform to the new federal deadlines. If any states do not conform to federal due dates, taxpayers may have to extend state tax returns based on incomplete federal information if the state corporate tax return is due before the new federal corporate due date.
Be wary
The new federal filing deadlines and the changes to the tax filing process will affect most, if not all, taxpayers. Although the new filing date rules will ultimately create a more rational tax return filing system, the changes also create some potential traps for taxpayers. It is critical for taxpayers to pay attention to these revised due dates and develop a clear understanding of how the rules will apply to them, beginning with their 2016 tax returns, in order to avoid unnecessary failure-to-file and failure-to pay penalties. Contact your Collins Barrow advisor for more information.
Click here to view tables on tax return due dates.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
