TAX ALERT: Highway Funding Bill Changes Tax Return Due Dates

HIGHWAY FUNDING BILLCongress has recently passed a Highway Funding Extension Bill (HR 3236). The overall policy discussion regarding long term infrastructure funding has included tax reform efforts. The extension bill includes several tax law changes. The law has passed both Houses of Congress and was recently signed by President Obama.

Here is a summary of the tax law changes incorporated into the Highway Funding Extension Bill:

Changing Filing Due Dates for Tax & Information Returns

Changes

  • Partnerships and S-Corporations tax returns will have an original due date of 3/15 for calendar year entities with an automatic to 9/15.
  • C-Corporations will have an original due date of 4/15 for calendar year entities with an extended due date of to 9/15. Special rules apply for other year-ends.
  • FBAR / FinCEN Form 114 will have a due date of 4/15 with an extension until 10/15.
  • Forms 1041, 5500, 990, 4720, 5227, 6069, 8870, 3520-A, 3520 have had extension provisions revised.

Timing: For tax years after 12/31/15. This will not impact the filing of 2015 tax return filing in early 2016.

Commentary: The goal of this measure is to streamline tax return filing and give taxpayers who own interests in flow-through entities sufficient time to receive K-1’s and prepare their individual income tax returns.

Modification of Mortgage Information Reporting Requirements

Changes: Requires Forms 1098 to report mortgage origination date, mortgage principal amount and the address of the mortgaged property.

Commentary: This provision is intended to make sure taxpayers comply with the $1 million mortgage debt limit for computing the mortgage interest deduction and 2nd home mortgage deduction rules.

Require Consistency Between Estate Tax Value and Income Tax Basis of Assets Acquired From a Decedent

Changes: Requires estates to provide to the IRS with the value of each piece of property at the owner’s Date of Death.

Commentary: This provision is designed to prevent beneficiaries from claiming basis at the time of an asset sale which is higher than the value claimed on the estate tax return filed in some previous year (often long before).

Clarification of the 6 Year Statute of Limitations for the IRS to Challenge Basis

Changes: Basis can be challenged for six years if it results in a substantial understatement of tax when the property is sold.

Commentary: The Supreme Court had disallowed the 6 year “extended” statute of limitations with respect to challenging basis, so Congress revisited the issue and clarified their intent to subject basis to the 6 year statute of limitations when basis has been materially overstated on a sale.

Revocation or Denial of Passport in the Case of Certain Unpaid Taxes

Changes: The Federal Government can deny issuing a passport or revoke an existing passport if an individual owes more than $50,000 in taxes.

Commentary: This provision is designed to increase tax compliance and accelerate tax receipts by limiting travel and incentivizing payment for persons owing taxes.

Expand Tax Collection Contracts

Changes: Requires the Federal Government to use private debt collection agencies to help collect taxes.

Commentary: This measure is designed to accelerate tax receipts and offset decreases in funding to the IRS by shifting collection activity to the private sector.

Make Permanent the Allowance for Defined-Benefit-Plan Assets to be Transferred to Retiree Medical Accounts and Group Term-Term Life Insurance

Changes: Extends the law as implemented by a previous 2012 law.

Timing: Extends this treatment through 2025 (instead of 2021).

If you have any questions about the tax law changes described here, please contact one of our in-house tax experts at 410.828.CPAS or jeaton@katzabosch.com.

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