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January 20, 2017
We want to make sure you are aware of several changes in due dates for 2016 federal tax returns that will impact the 2017 filing season.
Why were the changes needed?
The AICPA has been advocating for changes to various tax return due dates since 2006. Specifically, problems were created when flowthrough entities’ Schedules K-1, Partner’s (or Shareholder’s) Share of Income, Deductions, Credits, etc, containing investment information provded by partnerships and S corporations, arrived late. Sometimes these Schedules K-1 arrived within days (before or after) of the extended due date of their partners’/owners’ personal returns (October 15), and sometimes they arrived up to a month after the extended due date of their partners’/owners’ business returns (September 15).
Late Schedules K-1 made it difficult, if not impossible, to file a timely, accurate return. Often, practitioners were forced to use estimates to file final Forms 1040, U.S. Individual Tax Return, because partnership tax returns were due the same day (and needed to use estimates in filing final Forms 1120, U.S. Corporation Income Tax Return, due a month prior to the partnership due date).
Why are the new due dates helpful?
The new law, which has the Form 1065, U.S. Return of Partnership Income, as the first tax return due, is both logical and helpful to many types of entities. That’s because all other entities and individuals can be partners in a partnership and may need information from Schedules K01 from partnership investments in order to timely and accurately complete their tax returns. Note that practitioners and partnerships that still need time to complete the preparation of the partnership tax return will still be able to extend the return until September 15.
Once partnership and S corporation returns have been filed by March 15, and owners have received their Schedules K-1, individuals, trusts, and C corporations will have the information they need from their pass-through entity investments to file accurate and timely returns.
C corporations will largely benefit from the due date changes. Calendar-year C corporations will get an extra month to April 15 to file their returns (with extensions to September 15, changing to October 15 after 2025). Many C corporations previously needed to extend their returns because they were waiting on audited financial statements, which typically arrive by the end of March.
What this means for you:
As you pull together your tax documents for the coming tax season, we ask that you consider the following suggestions:
Partnership Returns — for partnership returns completed by our firm, we will need to receive all the necessary financial and other information to complete the return by March 1 in order to have it completed in time for you to file it by the March 15 due date. We will secure an extension until September 15, 2017, if your information is not received by that date.
If you are a partner in a partnership, this means that you MAY receive your Schedule K-1 (partner’s deductions, credits, etc) containing information to complete your individual income tax return (Form 1040) earlier than in prior years. This is good news, as ideally it will help us reduce the need for extensions.
Please provide your Schedule K-1 to our office when received. If you are a partner in several partnerships, please provide us a copy of your Schedule K-1s as you receive them.
Corporate Returns — although the due date has been moved from March 15 to April 18, we would still like to receive all the necessary financial and other information to complete the return as soon as possible. As you can imagine, we will be extremely busy through April 18 and would like to have as much time as possible to ensure we can give your return the time and attention it deserves. We will secure an extension until September 15, 2017, if your information is not received by April 1, 2017.
We understand that changes can be confusing. Please feel free to contact us if you have any questions, concerns, or need any assistance.