Accounting

New Corporate Tax Filing Due Date – Progress Not Perfection

Simplifying tax return processing for filers, preparers, and the government is a meaningful step in the right direction.

It’s not often that we consider tax laws a good thing. They’re complex, confusing and costly. However, the recent monumental change of several tax filing due dates may help alleviate some of these challenges in the long run.  Millions of financial tax filers this year will be affected, as corporation and partnership tax filing due dates have flipped. Since 2001, the AICPA and many others have been working with Congress to spearhead this change and today, 16 years later, the change is fully in place. We’ve highlighted the news, its impact and the potential disruptions it may have on both businesses and individuals.

The news

  • The C-Corporation tax return due date has moved from March 15th to April 15th. This year’s due date will actually fall on April 18th as the 15th falls on a weekend and the 17th is an observed holiday in Washington, D.C.
  • Partnership due dates swapped with the C-Corporation due date — due on March 15th.
  • Non-Profit organizations will not need to file two separate extension requests any longer to obtain a 6-month extension.

The impact

  • Simplifying tax return processing for filers, preparers, and the government is a meaningful step in the right direction.
  • Individuals and corporations will not need to wait for the data from flow-through returns.
  • Many companies will be able to put their prior year taxes behind them in April and won’t need to file ubiquitous extensions and pay the IRS based on estimated amounts. Amended return volume should go down too since the K-1’s will be available when needed.
  • Fewer touchpoints result in fewer opportunities for inadvertent errors.
  • Non-profits can eliminate the need for two 90-day extensions. They are now offered one, 6-month extension.
  • Cost savings, in terms of time and money, is significant. The National Federation of Independent Business reports that small business’ tax compliance costs are 67 percent higher than for big business, some $18-$19 billion per year. We expect this number to decrease over time.

Cautions

  • Several states haven’t aligned their filing due dates with the new Federal return due dates yet. As a result, companies that file returns in multiple states will need to keep a close eye on each state’s due date if they’re cutting it close.
  • An example – Delaware is lining up C-Corporation due dates with the April 18th Federal due date but they didn’t change the partnership return due date. It will continue to be April 30th for calendar year taxpayers until its revised later this year.
  • Watch the 2017 quarterly filing dates. 1Q17 will likely be due before the 2016 corporate return is due.
  • There is one major mishap with the amended dates to note: 1099-Misc forms (other than Box 7) didn’t get their due dates changed and for electronic filers (which means everyone), they’re not due until March 31st. Preparers filing partnership returns on March 15th might not have their brokerage and other investment-related 1099’s yet so unless they issue them well before the deadline, many of their customers will need to file extensions or amended returns.

Progress Not Perfection

Did we swap one set of problems for another? Not from our perspective. These changes will go a long way toward simplifying the tax process for millions of businesses and individuals.  And while there’s still more to go, we are making progress towards a more efficient and streamlined approach to tax filing and that is a good thing for all of us.

 

John Orlando is the CFO at Centage Corporation.