Highway Funding Act Contains Hidden Tax Law Changes

Hidden in the temporary highway funding act which recently became law are several tax and financial reporting changes.  Most of the changes are effective after December 31, 2015 and apply to the 2016 tax year.

Tax Return Due Date Changes
taxes2The new Act changes the income tax return due dates.  Income tax returns will be due based on whether taxation occurs at the business level (C corporations) or at the owner level (S corporations and partnerships). The law requires calendar year-end S corporations and partnerships to file by March 15th (or 2½ months after the close of their tax year) and C corps to file by April 15th (or 3½ months after tax year close).

Under the prior law, calendar year partnership returns were due on April 15th. For a calendar year partnership, the new tax return due date will now be March 15th.  The act provides that the maximum extension for a partnership or S corporation income return will be 6 months (previously 5 months).

For C corporations, the new income tax return due date will be the 15th day of the fourth month following the close of the corporation’s tax year. Under prior law, these returns were due on the 15th day of the third month following the close of the corporation’s year. Corporations will be allowed a 6 month extension, except that calendar year corporations will get only a 5 month extension until 2026 and corporations with a June 30th fiscal year end will get a seven-month extension until 2026. The new due dates apply to C corporation income tax returns for tax years beginning after December 31, 2015. However, for C corporations with fiscal years ending on June 30th, the new due dates will not apply until tax years beginning after December 31, 2025.

FinCEN Form 114 Reporting

This form is required to be filed if the taxpayer has over $10,000 in a foreign account.  Previously, this form was required to be filed by June 30th and did not allow for any extension of time to file. For tax years beginning after December 31, 2015, the Form will be due on April 15th (the same day as a calendar year taxpayer’s income tax return).  This new law also allows for a 6 month extension (an October 15th due date for a calendar year taxpayer).  Those who fail to properly file a complete and correct this form may be subject to a civil penalty not to exceed $10,000 per violation for non-willful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.

FinCEN Form 114 must be filed separately from your income tax return with the Financial Crimes Enforcement Network (FinCEN).  This is a Bank Secrecy Act (BSA) form and is not processed by the IRS. The FinCEN Form 114 does not otherwise affect or replace a taxpayer’s obligation to file an IRS Form 8938 if they meet the relevant reporting threshold for Form 8938. Form 8938 is used to report a taxpayer’s foreign financial assets if the total value of all the specified foreign financial assets is more than the appropriate reporting threshold.

The new law provides that any taxpayer who is required to file the FinCEN 114 Form for the first time, may request waiver of any penalty for failure to timely request or file an extension.
If you would like more information about the tax law changes included in the Highway Funding Act contact one of our tax and business attorneys at 937-223-1130 or Jsenney@pselaw.com.

 

 

AUTHOR: Jeff Senney
jsenney@pselaw.com


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