On July 31, 2015, President Barack Obama signed into law Public Law 114-41, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. Although the primary purpose of the law is to extend for the short term the Highway Trust Fund expenditure authority, the act contains provisions that change many tax return due dates and other tax items.
Tax Return Due Dates
Many tax return due dates have been changed. The changes are effective for tax years beginning on or after Jan. 1, 2016, and generally will not affect businesses until returns are filed in 2017.
- The original due date for C corporations will be moved to the 15th day of the fourth month after the close of the tax year (April 15 for calendar-year taxpayers) with a five-month extension until Sept. 15. However, C corporations with a June 30 year-end will continue to have a due date of the 15th day of the third month. Thirteen states currently have a March 15 corporate filling deadline. Unless changes are made by the states prior to the 2016 filing season, some state deadlines could remain March 15.
- Beginning with reports filed in 2017 for holdings during 2016, Financial Crimes Enforcement Network Form 114, “Report of Foreign Bank and Financial Accounts” (FBAR), will be due April 15 but is eligible for a six-month extension through Oct. 15.
- The original due date for partnerships will be moved to the 15th day of the third month after the close of the tax year with a six-month extension.
- The deadline for S corporations is unchanged and remains the 15th day of the third month after the close of the tax year with a six-month extension.
- Several other modifications will be made to extension periods:
- Trusts will be eligible for a 5.5-month extension (Sept. 30 for calendar-year trusts).
- Benefit plans filing Form 5500, “Annual Return/Report of Employee Benefit Plan,” will be eligible for a 3.5-month extension (Nov. 15 for calendar-year returns).
- Organizations filing Form 990, “Return of Organization Exempt From Income Tax,” will be eligible for a six-month extension (Nov. 15 for calendar-year returns).
- Several other special trust and excise tax returns also will have minor revisions to their extension periods.
Estate and Gift Provisions
In general, taxpayers who receive property from an estate obtain a tax basis in the property equal to the fair market value of the property as of the date of death. In the past, some beneficiaries either did not know or simply disagreed with the value reported on the estate tax return. The new provision requires that if the estate is required to file Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return,” and estate tax is paid, the beneficiary must use the fair market value of the property reported on Form 706 as the tax basis. The law also requires executors of these estates to comply with a new information-reporting requirement to notify the beneficiaries of the amounts reported on Form 706. A 20 percent accuracy-related penalty may be applied if the beneficiary files a return using basis amounts inconsistent with the value reported on Form 706. The IRS is expected to provide guidance on the implementation of the new reporting requirement and the application of the penalty provisions.
Effective for the 2016 calendar year and the 2017 reporting season, mortgage lenders will be required to include additional information on annual Form 1098, “Mortgage Interest Statement,” including the amount of outstanding principal at the beginning of the year, the date of mortgage origination, and the address of the property securing the mortgage.
Section 6501 incorporates a six-year statute of limitations for assessment in lieu of the regular three-year statute of limitations in cases where a taxpayer has understated gross receipts by more than 25 percent. The new law treats an overstatement of basis as an understatement of gross receipts for purposes of the 25 percent test.
Although most of these changes have been enacted to allow sufficient time to adjust internal processes to the new law, taxpayers should take care to file estate tax returns consistent with the new law.