Before leaving for its August recess, Congress passed a three-month extension of funding for the Highway Trust Fund, funding which was set to expire on July 31, 2015. The legislation includes several tax-related provisions. Congress had also passed a variety of other tax provisions during the year. Still on the table are the most significant pieces of tax legislation that Congress has been working on this year: international tax reform and an extension of expiring provisions. The following is a list of what Congress has managed to accomplish so far.
TAX RETURN DUE DATES
Perhaps the change that will affect the largest number of tax practitioners is a change in the due dates for certain tax and information returns. While a game-changer for many return preparers’ workflow, most deadlines do not shift under the new law until returns due in 2017. Partnership information returns will be due on or before the fifteenth day of the third month following the close of the fiscal year, or March 15 for calendar-year entities. For corporate tax returns, the due date shifts from the fifteenth day of the third month to the fifteenth day of the fourth month, or April 15 for calendar year taxpayers. For partnerships, the maximum filing extension is for six months, to September 15 for calendar-year taxpayers. For corporations, the maximum extension is six months, or seven months for June 30 year-end corporations through 2025. The changes are generally effective for returns for tax years beginning after Dec. 31, 2015, so the changes will not affect the 2015 tax returns of calendar-year taxpayers.
Taxpayers with foreign accounts who have had a June 30 FBAR deadline will now be required to file FinCen Report 114 by April 15, although a new six-month extension is also provided. A penalty waiver may also be available for first-time filers who fail to request an extension. The due date for Form 3520, for reporting transactions with foreign trusts and receipt of certain foreign gifts, becomes April 15 for calendar-year taxpayers, with a maximum six-month extension. The due date for Form 3520-A with respect to foreign trusts with a U.S. owner will become the fifteenth day of the third month after the close of the trust’s tax year, with a maximum six-month extension. The maximum extension for return of trusts filing Form 1041 is a five-and-a-half-month period, to September 30 for calendar-year taxpayers.
Other extension dates provided include an extension for Form 5500 by employee benefit plans of three-and-a-half months, to November 15 for calendar-year plans; an extension for Form 990 series by exempt organizations of six months, to November 15 for calendar-year filers; an extension for Form 4720 by exempt organizations reporting excise taxes of six months beginning on the due date for filing the return; an extension for Form 5227 trust returns of six months beginning on the due date for filing the return; an extension for Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and computation of Section 192 deduction of six months beginning on the due date for filing the return; and an extension for Form 8870 of six months beginning on the due date for filing the return.
OTHER NEW LAWS
- Mortgage reporting requirements. Lenders will be required to include additional information on Form 1098: the amount of the outstanding principal on the mortgage as of the beginning of the year, the date of origination of the mortgage, and the address or other description of the property which secures the mortgage. This change applies to returns and statements after Dec. 31, 2016. This change is designed to provide the Internal Revenue Service with information to better audit the accuracy of mortgage interest deductions.
- Consistent basis reporting. For property acquired from a decedent, a new provision requires that the basis in inherited property reported by the heir not exceed the basis in the property reported by the estate. The executor of the estate is also required, along with filing an estate tax return, to file an information return reporting basis information with the IRS and those inheriting property. A penalty is provided for inconsistent basis reporting. These changesa apply to property with respect to which an estate tax return is filed after July 31, 2015.
- Six-year statute of limitations on overstatement of basis. Responding to the Supreme Court decision in Home Concrete that an overstatement of basis did not constitute an understatement of income and therefore did not engage the six-year statute of limitations, a law change ”clarifies” that an overstatement of basis is an omission from gross income engaging the six-year statute of limitations. This change applies for returns filed after July 31, 2015, and any other returns for which the statute of limitations has not yet run.
- Excess pension assets. Another law change permits employers to transfer excess defined-benefit plan assets to retiree medical accounts and group term life insurance for an additional four years through 2025.
- Equalization of excise taxes. The legislation also includes an excise tax provision equalizing excise taxes on liquefied natural gas, liquefied petroleum gas, and compressed natural gas.
- Veterans health coverage. The legislation also modifies the Internal Revenue Code to provide that, under the Affordable Care Act and the employer health insurance mandate, for purposes of determining whether an employer is an applicable large employer for any month, an individual shall not be taken into account as an employee for such month if the individual has medical coverage under Tricare or the Veterans Administration. This change applies to months beginning after Dec. 31, 2013.
The legislation also provides that an individual shall not fail to be eligible for a health savings account merely because the individual receives hospital care or medical services for a service-connected disability. This change applies to months beginning after Dec. 31, 2015.
PROVISIONS IN TRADE LEGISLATION
At the end of June, Congress passed a couple of pieces of trade legislation that also included a few tax provisions. The bipartisan Congressional Trade Priorities and Accountability Act of 2015 permits penalty-free withdrawals from qualified retirement plans for certain federal law enforcement officers, federal firefighters, customs and border protection officers, and air traffic controllers.
The Trade Preferences Extension Act of 2015 also included several tax provisions. Included is a provision to retroactively extend the Health Coverage Tax Credit from 2014 through 2019. Another tax provision prohibits taxpayers claiming a foreign earned income exclusion or foreign housing cost exclusion from also claiming the refundable child tax credit. A provision also provided increased penalties for certain information returns.
In an effort to better audit entitlement to education tax breaks, an additional provision requires taxpayers claiming certain education deductions and credits to have a Form 1098-T, and penalties are provided for educational institutions that fail to provide information returns with accurate taxpayer identification numbers.
The three-month extension of funding the Highway Trust Fund will require Congress to revisit the issue in the fall, with the House and Senate still pushing for different forms of longer-term funding, and also with additional tax provisions likely to be included as revenue offsets. The fall will also see Congress continue to deal with the more significant tax issues of international tax reform and extension of expiring provisions. International tax reform consensus still appears a little elusive; however, extension of expiring provisions is likely to get done somehow, even if once again at the eleventh hour.
George G. Jones, JD, LL.M, is managing editor, and Mark A. Luscombe, JD, LL.M, CPA, is principal analyst at Wolters Kluwer Tax & Accounting US.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access