On Friday, July 31, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. This act has several parts which include important tax compliance provisions. These provisions include modifications to six-year statute to basis overstatement cases, imposes new requirements for additional information to be included in mortgage interest statements, requires consistent basis reporting for estates and beneficiaries and most importantly changes the due dates of several types of tax returns.
The modification to the six-year statute to basis overstatement cases changes the treatment of an overstatement of basis to an omission of gross income. This modification is overruling the decision of Home Concrete & Supply, LLC 132 S. Ct. 1836 which was ruled on in 2012, in which the tax court ruled that basis overstatement was not an increase to gross income and did not extend the six-year statute.
The provisions in this act which require additional information to be included in mortgage information statements require lenders to disclose the following on all statements issued after Dec. 31, 2016: outstanding principal balance of the mortgage at the beginning of the calendar year, the origination date of the loan, and the address of the property for which the mortgage was written. These new provisions apply to all statements which report more than $600 in mortgage interest paid in the calendar year.
The new law requires new reporting of basis of property received from trusts to beneficiaries. The law requires that beneficiaries report the basis of property received at the same value that the basis of the property is valued at for estate tax purposes. The act also requires that administrators that must file estate tax returns to file information returns with the IRS as well as payee statements issued to the any beneficiary who receives property from or acquires interest in the estate. These required statements must itemize each interest and its corresponding value which were reported on the estate tax return. These new basis reporting rules are effective the date the law was enacted.
The most important, and most likely applicable, change resulting from this new law is the change of due dates for certain tax returns. First, the act changes the due date of partnership returns to March 15th for calendar year partnerships or the 15th day of the third month following the year-end for fiscal year partnerships. While this is one month sooner than the old due date of April 15th or the 15th day of the fourth month after the fiscal year end, the new law allows for a six month extension for partnership returns versus the old five month extension. These new due dates will be effective for tax years beginning after 12/31/15.
Secondly, C corporation tax returns are now due April 15th for calendar year-end filers or the 15th day of the fourth month after the year-end of a fiscal year filer, with a six month extension. There are two exceptions to the general six month extension rule. First, calendar year C Corporations will have be allowed a five month extension versus the six month extension. Second, fiscal year-end taxpayer with a June 30th year-end will be allowed a seven month extension. These five and seven month extension rules will be in effect until 2026. These new due dates will be effective for tax years beginning after 12/31/15.
Next, the due date for the foreign reporting tax return FBAR - FinCEN Form 114's due date has changed from June 30th to April 15th. More importantly, for the first time a six month extension will be granted for this return. The act also provides for a penalty waiver for first time FBAR filers who are unintentionally late. The law also has made the due date for Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, April 15th with a six month extension available.
Finally, while the act did not change the due date of Form 1041, Income Tax Return for Estates and Trusts, it changed the extension period from five months to five and a half months, making the extended due date for calendar year-end trust returns September 30th versus September 15th.
For more information on the new bill, please contact your professional at UHY LLP in Detroit 313 964 1040, Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040.
Wednesday, April 24, 2019 | 7:30 AM – 9:30 AM EDT | The Hartford Club