December 3, 2015 – This summer, federal lawmakers enacted legislation that includes several tax-related provisions. The tax law changes the federal income-tax return filing deadlines for C corporations and partnerships, revise the extension periods for various returns, impose new information reporting requirements for inherited property, and add a new requirement for taxpayers claiming certain higher education tax benefits.
New Filing Deadlines
- Partnerships. Tax returns will be due by the fifteenth day of the third month following the end of the tax year (by March 15 for a calendar-year partnership). Currently, the filing deadline for partnerships is the fifteenth day of the fourth month following the end of the tax year.
- C corporations. Tax returns will be due on the fifteenth day of the fourth month after the end of the tax year (by April 15 for a calendar-year corporation). Currently, the filing deadline for C corporations is the fifteenth day of the third month following the end of the tax year.
These filing deadline changes are generally effective for returns for tax years beginning after December 31, 2015 (for 2016 and later tax years). However, the filing deadline change for a C corporation with a June 30 fiscal year-end won’t apply until tax years beginning after December 31, 2025.
In conjunction with the filing deadline changes, Congress has also revised the filing extension periods available to various entities, effective for returns for tax years beginning after December 31, 2015. The new extension periods will be six months for a partnership return (Form 1065), five and a half months for a trust return (Form 1041), three and a half months for an employee benefit plan return (Form 5500), and six months for an exempt organization return (Form 990).
Inherited Property Requirements
In another change, executors of estates that are required to file federal estate-tax returns must furnish statements identifying the value of each property interest included in the gross estate. The statements must be furnished to the IRS and to each person acquiring a property interest included in the gross estate within 30 days after the estate-tax return’s due date, including extensions (or within 30 days after the return is filed, if the return is filed before the due date).
The new reporting requirement was scheduled to take effect for property interests included in estate-tax returns filed after July 31, 2015. However, for statements otherwise required to be filed with the IRS or furnished to beneficiaries before February 29, 2016, the IRS has extended the due date to February 29, 2016.
Higher Education Expenses
Under another provision, taxpayers claiming certain tax breaks for higher education expenses will be required to have a Form 1098-T (Tuition Statement) from the relevant educational institution. This requirement will apply for purposes of both the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The AOTC is worth up to $2,500 annually (per student), while the LLC is worth up to $2,000 (per tax return).
The requirement to have a Form 1098-T would also be applicable for purposes of claiming the higher education expense deduction of up to $4,000, if Congress extends the deduction. (It expired after 2014.)
Earlier this year, the Treasury Inspector General for Tax Administration (TIGTA) reported that for 2012, more than 3.6 million taxpayers received approximately $5.6 billion in potentially erroneous education credits. Significantly, TIGTA found that over 2 million taxpayers received more than $3.2 billion in education credits for students with no Form 1098-T.
The new rule requires that taxpayers receive a Form 1098-T (containing all pertinent information) as a condition of claiming either the credits or the deduction (if the deduction is available). Receipt of the 1098-T by the dependent of the taxpayer will also satisfy the requirement. This change is effective for tax years that begin after June 29, 2015. Because most individual taxpayers report on a calendar-year basis, the new requirement will first apply to education expenses incurred during the 2016 tax year.
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