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Planning Ahead for Next Year’s Tax Changes

November 03, 2016

Patrick L. Connolly, CPA, MST
Partner

In 2015, Congress passed—and President Barack Obama signed—legislation that created a few major changes in the upcoming tax-filing season. The April 15 deadline, as well as the extended deadline of October 15, for individuals will remain unchanged, but there is one new deadline of which taxpayers should be aware: Form 1065, U.S. Return of Partnership Income, is now due March 15 rather than April 15.

What does that mean for businesses and tax professionals?

The new deadlines (in theory) make more sense

The changes coming next year are, in part, the result of years of lobbying by the American Institute of CPAs (AICPA), as well as others. For individual taxpayers with ownership interests in partnerships, having the same due date for individual and partnership tax returns made it difficult, if not impossible, to file individual returns by the April 15 due date.

Partnerships, in themselves, do not pay income tax. Rather, the invested parties involved in the partnership include their own share of the partnership’s income (or loss) on their individual tax returns. That said, individuals involved in a partnership—whether it’s an LLC or LLP—must rely on information from the partnership’s return in order to accurately complete their individual returns in a timely manner.

Moving the deadline for Form 1065 up to March 15 promotes earlier partnership tax filings, and, in turn, gives individuals all of the information they need well in advance of the April 15 deadline.

Also included in the legislation was a change to the due date of C Corporations, from March 15 to April 15 for calendar year corporations. It is important to note the due date for calendar year S Corporations remains March 15.

This is (generally) good news for tax professionals

The re-ordering of federal deadlines will, in theory, create a more manageable “busy season” for tax professionals. Since many tax filers—whether they are corporations, partnerships or families—are reluctant to file for extensions. The new March 15 deadline will force partnerships to plan ahead and adjust to the new deadline.

For tax professionals, this means that complex, time-consuming work will be pushed toward the beginning of the new year, resulting in a more spread out workload.

The challenge for tax professionals, and their clients, will be the need to accelerate the timing of partnership tax return work during the 2017 busy season. Simply put, next year’s tax season will not be “business as usual.” Timing that has been effective in previous years needs to rethought.

It’s (understandably) safe to expect a delay in returns

This is the first tax season these new deadlines will be in place, so it’s possible that we’ll experience a few bumps along the way. If partnerships need more time and decide to file for extensions, it could result in an increase in extensions for individual returns.

All taxpayers should, as always, plan ahead and do their best to file accurate returns as soon as they reasonably can.

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Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

 

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