A Few Surprise Income Tax Highlights in the Highway and Transportation Funding Bill Enacted July 31, 2015
Tax return due dates:
Starting in 2017, partnership tax returns will be due 2 ½ months after year end (March 15 for calendar partnerships rather than April 15), and most C corporation tax returns will be due 3 ½ months after year end (April 15 for calendar C Corps rather than March 15). S Corporation tax returns remain due 2 ½ months after year end. Also, FBAR (Report of Foreign Bank and Financial Accounts) returns will be due April 15 (rather than June 30) and a six-month extension period will be allowed. The hope is that by revising the tax return due dates, individuals will have access to the information needed for tax returns in sufficient time for the individual tax returns to be completed by the un-extended due date.
Mortgage interest reporting:
The amount of the outstanding principal balance, the address of the property, and the loan origination date will now be required along with the annual mortgage interest reporting on Form 1098. This will provide the IRS more information to consider when evaluating if mortgage interest deductions have been properly limited.
Stepped-up basis conformity between estates and beneficiaries. Six-year statute of limitations period for basis overstatements:
Executors of large estates will need to provide information to the IRS and the beneficiary providing the value of each interest received as reported on the estate tax return. Anyone inheriting property from a decedent will not be allowed to treat the property as having a higher basis than the basis reported by the estate for estate tax purposes. New penalties on basis overstatement will apply and a new six-year statute of limitations will apply.
Generally the IRS has a three-year statute of limitations period to assess deficiencies on a tax return. Where any overstatement of basis results in a substantial omission (in excess of 25%) of gross income stated in a tax return, now a six-year statute of limitations period will apply. This gives the IRS more time to assess deficiencies on those who overstate basis of assets on their tax returns.