Article of Interest

Return Due Date Changes and More…
By:  Ryan E. Scharar, JD, CPA -- Scharar Law Firm, PC and Bethany Peterson, JD, LLM – Scharar Law Firm, PC

President Obama signed the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the “Act”) into law on July 31, 2015. In addition to providing a short-term extension of the Highway Trust Fund, the Act also changes important tax compliance provisions, including income tax return due dates for both flow-thru entities and corporations; the Report of Foreign Bank and Financial Accounts (the “FBAR”) filing deadline; new rules requiring consistent basis reporting between individuals inheriting property and the corresponding estate return; additional information reporting on mortgage information statements; and a change in Internal Revenue Code (“IRC”) 1065, which provides an extended six-year statute of limitations for certain returns.

Income Tax Return Due Date Changes

The corporate and partnership return due date changes have been a hot topic of discussion since partnerships, which currently file later than corporations, often hold up corporate returns that need the partnership information to file a tax return. As a result, partnerships (and S-corps) are now required to file their returns by March 15 (formerly April 15) if they follow a calendar tax year or by the 15th day of the third month after the close of a fiscal year. The C corporation return due date will now move to April 15 (formerly March 15) for calendar year corporations, or the 15th day of the fourth month after the close of the tax year for fiscal year taxpayers. The change gives corporations and individuals more time to receive their tax information from partnerships before their own returns are due, theoretically reducing the need for corporations and individuals to file for filing extensions.  The changes regarding due dates will effect taxable years beginning after December 31, 2015. This means that actual reporting due dates will begin with December 31, 2016 calendar year tax returns – due to be filed in 2017. 

FBAR Due Date moves to April 15

The annual FBAR filing deadline has also been moved from June 30 to April 15. The FBAR also known as FinCEN Form 114 is a form that “United States persons” (which includes U.S. citizens, U.S. residents, entities, corporations, partnerships, or limited liability companies) must file if they have a financial interest or signature authority over a foreign financial account with an aggregate value of over $10,000 at any time during the calendar year.  Making the FBAR due the same day as the individual return ties the two returns more closely together. The new provision also makes taxpayers eligible for a six-month extension to file Form 114. That’s great news since there was no extension available prior to this despite the overlapping information requirements between the Form 114 and individual returns.  

Consistency in basis reporting is now required

In the estate and gift tax provisions, the basis rules for people inheriting property and estates have also been affected by the Act. Under the new IRC section 1014, inherited property cannot be taken with a higher basis than the estate’s basis in the property as reported on the estate return. Any estate returns must now include the information for anyone receiving an interest in the estate property. This provision will affect any estate returns filed after July 31, 2015. Any estate return currently filed will be subject to this additional reporting requirement. Attorneys should carefully consider the effect of these new rules on their clients’ estate plans.    

Additional information required for mortgage information statements

The Act expanded the information required on mortgage information statements to include the mortgage outstanding at the beginning of the calendar year, the mortgage date of origin, and the address of the property that secures the mortgage. A mortgage information statement must be sent to individuals who pay more than $600 of mortgage interest in a calendar year. This change will effect statements that are made after December 31, 2016. Attorneys representing lenders definitely want to make sure they are properly preparing to report the additional information required by the Act.

An overstatement of basis is not an understatement of income

The Act amends IRC section 6501 so that the overstatement of basis on a tax return is not subject to the extended six-year statute of limitations. This is especially significant since the Supreme Court ruled in Home Concrete & Supply v. U.S., 132 S. Ct. 1836 (2012), that the overstatement of basis constitutes underreporting of income. The Act extended the usual three?year statute of limitations the IRS has to assess a tax deficiently to six years. The Act applies to returns filed after the date of enactment as well as returns that were filed on or before the date of enactment if the date of assessment has not expired. 

Now that you know what’s changed, how can you use this in your practice? If the changes affect any of your clients, a friendly legal update is a great way to reconnect with clients to help them prepare for the upcoming changes in their tax return deadlines and reporting requirements.

Ryan Scharar and Bethany Peterson are attorneys with the Scharar Law Firm, PC in Fort Worth.  Their practice includes representing small businesses and individuals in the areas of corporate and tax law.  They can be reached at (817) 918-3035.