As we look forward to a new year, the last thing we want to think about is taxes, but guess what? Filing season is right around the corner and there are a few important things you need to know for the upcoming year.
Deadlines are changing.
In prior years, W-2 and 1099 forms were required to be distributed to the recipients by Jan. 31, but not required to be sent to the IRS or Social Security until Feb. 28. The deadline to the recipients hasn’t changed, it’s still Jan. 31. Most individuals won’t notice the change. However, the deadline to send the forms to the IRS and Social Security has been moved up to Jan. 31.
On one hand, this makes sense because you had to get them done and to the recipients by that date anyway, but on the other hand, it does not give employers time to make corrections to forms prior to filing them with the IRS.
This deadline was moved in an effort to combat the overwhelming problem of identity theft. The IRS will now more easily be able to compare the W-2 or 1099 filed by an employer to the tax return filed by an individual to make sure they match.
For the individual taxpayer, it means they may have to wait a little longer for their refund. Especially people who file early (in January) and expect a quick refund. The IRS will likely not be issuing any refunds until Feb. 15.
The deadlines for C Corporations and Partnerships have been swapped. In previous years, Partnership returns weren’t due until April 15; however, next year that deadline has been moved up a month. Both Partnerships and S Corporations will be due March 15.
Hopefully, this will help business owners file their tax returns timely since they may have their Schedule K-1s a little earlier. The deadline for C Corporations was March 15; however it has been moved to April 15. (Note: In 2017, April 15 falls on Emancipation Day, so the deadline is actually April 17.)
FinCEN Form 114 Report of Foreign Bank and Financial Accounts previously was due June 30, had to be filed electronically and had no extension available. It is still required to be filed electronically; however, they’ve moved the deadlines to be more in line with individual income tax deadlines. They are now due April 15 (or next year on April 17) and can be extended to October just like the individual income tax return.
Many great deductions set to expire were made permanent or extended.
The 15-year recovery period for qualified leasehold improvement property, qualified retail improvement property and qualified restaurant property was made permanent. This means for qualified property you can recover the cost in half the time it previously took to get a full deduction.
The 50 percent additional first-year deprecation deduction is extended and modified through 2019. You will continue to be able to deduct 50 percent of the cost of new business property through 2017. For 2018, the percentage drops to 40 percent. For 2019, the percentage drops to 30 percent. The bonus depreciation goes away entirely after 2019.
The Section 179 depreciation deduction ceiling was reinstated and indexed. The expensing limit remains at $500,000 for 2016 but will index up to $510,000 in 2017. The PATH Act also removed the language that excluded air conditioning and heating units from being able to utilize the Section 179 expense deduction, so you can now use it for air conditioning and heating units.
The work opportunity credit is reinstated through 2019. This credit is available for employers hiring members of targeted groups (including veterans and long-term unemployment recipients.) The credit can be up to $2,400 per employee.
The differential wage payment credit was modified and made permanent. This credit is for employers who compensate reservists called to active duty for all or part of the difference between their private-sector wages and their earnings from the U.S. Military.
A provision was made permanent allowing an S Corporation to adjust the shareholder’s basis by the fair market value of a charitable contribution of appreciated property. Making this provision permanent allows S Corporations to more appropriately plan their charitable giving of property.
The lookback period for the Built-In Gains Tax has been reduced to five years and made permanent. Previously, the lookback period was 10 years.
This provision applies to conversions from C Corporations to S Corporations and whether or not the shareholder has to pay tax on the conversion. Dropping the lookback period to five years allows for later succession planning.
Effective 2018 (while this seems like a long time away, you can elect into early treatment), there are new rules to streamline partnership audits to impose entity-level liability for payment of taxes.
Small partnerships (less than 100 partners) can elect out of this process or elect to have the new audit rules apply to them before 2018. Under the new rules, any audit adjustments will be assessed and taxed at the partnership level and will not be assessed against the individuals owning the partnership.
Proposed regulations have been set forth which could be finalized in 2017. They would characterize some related debt transactions as equity. Specifically, notes to a related shareholder, notes issued to acquire equity in a related entity and notes distributed to a related entity in an asset reorganization.
The above information is not meant to be a comprehensive list, as there are many more tax changes and modifications taking effect in 2017. As always, you should consult your tax advisor if you have any questions on any of these new, modified or extended provisions.