Corporate Income Tax Update

 In Tax Planning

The Internal Revenue Service is making some changes that are coming into effect at the beginning of the 2016 tax year. These changes will impact dates that different entities file their taxes and should benefit both CPAs and their clients by giving everyone a little extra breathing room around tax season. The AICPA has been advocating for changes to various tax return due dates since 2006. The updated corporate income tax laws will hopefully provide a more logical flow of information for practitioners and clients.

“In general I think most CPAs are looking forward to the changes,” said Texas Society of CPAs chair Allyson Baumeister, who is also a principal in charge of the Fort Worth office at CliftonLarsonAllen. “The purpose of them is to spread out the workload a little bit, particularly as it pertains to flow-through entities, so that the flow of K-1s works better. Entities that generate K-1 flow-through activity will be due before C corps and 1040s that receive that K-1 information. I think we’re all looking forward to seeing how it works, and we’re very hopeful it will help with the compression issues.”

C corporations that file on a calendar year basis will change from March 15th to April 15th, following the end of the taxable year. C corporations will greatly benefit from the due date change. Calendar-year C corporations will gain an extra month to file their returns. In the past, C corporations often found themselves requesting an extension for their returns for various reasons, including waiting on audited financial statements to arrive. Now, the same C corporations may not need to file an extension with the new filing date of April 15th. It is important to note that the due dates for estimated tax payments do not change.

For partnerships, the due date changed from April 15th for calendar year partnerships to March 15th. The due date for fiscal year partnerships is changed to the 15th day of the third month following the close of the fiscal year. This change accelerates the due date by pushing the date up 30 days sooner than the previous schedule. Now is a good time for partnerships to test their processes and scheduling to prepare for any new changes that need to be put in place before the new due date for 2016.

“Partnerships and C corporations are basically switching places,” said Baumeister. “The partnership returns will be due first and then extended so that partnership K-1s can flow into C corporation returns and into individual returns, and there’s more time in between those partnership returns being filed and the C corp and 1040s being filed. For this filing season that we’re in, on extension partnership returns will be due September 15 and calendar year C corporation returns are due September 15 as well. Sometimes that makes it impossible for the C corporations to file with correct data if they don’t receive that K-1 until their own due date. So now the C corporation returns will be due in October, and that gives those entities a month after receiving those K-1s to be able to finish their returns and have all of the data needed.”

The new due dates will also affect some individual tax filers. For instance, people who need to file foreign bank account reports will move from June 30th to April 15th, with an optional six-month extension. Trust returns will also have an extension, with the new due date of September 30 instead of September 15th.

Our staff at Bressler & Company will help clients through the transition in filing dates for the upcoming tax year. Moving forward into the 2017 tax season, we hope our clients benefit from the changes in filing dates as we align ourselves with the federal requirements. The AICPA Tax Division states that they will continue to listen to, and work with, members to advocate for additional ways to simplify and make the tax system better for taxpayers and practitioners.

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