Tax Year 2016 Business Income Tax Deadlines

With the commencement of the new year, it is very important for business owners and corporate executives to focus on the main 2016 business income tax deadlines. In this short review of 2016 business income tax deadlines, I will focus only on the most common income tax deadlines of a corporation that operates on a calendar-year basis (i.e. the corporate fiscal year is the same as the calendar year).

It is important to keep in mind that other 2016 business income tax deadlines (such as employment tax deadlines) may apply to your particular situation. Furthermore, one must remember that the exact deadlines will change if the corporation does not operate on the calendar-year basis, but on its own fiscal year.

Keeping in mind these two important exceptions, here are the most common 2016 business income tax deadlines:

March 15, 2016: Forms 1120 and 1120S for tax year 2015 are due. Schedules K-1 (for S-corporations) are due at that time as well. If, however, the corporation does not wish to file its tax return at that time, it can file Form 7004 by March 15, 2016 to obtain an automatic six-month extension to file 2015 Forms 1120 or 1120S. (However, the estimated 2015 tax liability must still be paid by March 15, 2016). Moreover, electing large partnerships must also furnish Schedule K-1 (Form 1065-B) at that time.

April 18, 2016: There are three major 2016 business income tax deadlines associated with April 18, 2016. (Normally, the deadline would be on April 15, but April 15 2016 falls on a Saturday and April 17 is a federal holiday; therefore, in 2016, the due date shifts to April 18). First, partnerships must file their 2015 Forms 1065 and supply Schedules K-1 to each partner. If a partnership wishes to file its Form 1065 later, it must file Form 7004 by April 18, 2016, in order to obtain an automatic five-month filing extension.

Second, Electing Large Partnerships must file their 2015 Forms 1065-B. Similarly, Form 7004 must be filed by April 18, 2016, if the Electing Large Partnership wishes to obtain an automatic five-month filing extension.

Third, corporations must make their first corporate estimated tax payments by April 18, 2016.

June 15, 2016: Second corporate estimated tax payments are due.

September 15, 2016: There are three major 2016 business income tax deadlines associated with September 15, 2016. First, all partnerships that filed Form 7004 must file their 2015 Forms 1065 by September 15, 2016.

Second, all corporations that obtained six-month extension by filing Form 7004 must file their 2015 Forms 1120 and 1120S by September 15, 2016.

Third, corporations must make their third corporate estimated tax payments by September 15, 2016.

October 17, 2016: Electing Large Corporations must file their extended 2015 Forms 1065-B.

December 15, 2016: Fourth corporate estimated tax payments are due.

First Quarter of 2013 Underpayment and Overpayment Interest Rates

On November 30, 2012, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning January 1, 2013. The rates will be:

  • three (3) percent for overpayments [two (2) percent in the case of a corporation];
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

Taxability of Grants and Fellowship Amounts

With the cost of higher education sky-rocketing, it may make financial sense for students and families to consider grants and fellowships.  But what about the tax consequences of receiving a grant or fellowship payment? Are grants and fellowship taxable?

The question depends upon whether the individual is a degree candidate.  A degree candidate can exclude from taxation grants and fellowships that pay for tuition and course-related fees, books, supplies and equipment necessary for courses (candidates must first meet the degree test under IRS rules).  Non-degree students, however, must report the entire amount of grants and fellowships as income received.

There are some limitations as well for degree candidates.  Degree candidates may not exclude any portion of a grant and/or fellowship received for purposes not described above, including room, board or similar expenses.  Additionally, in general, amounts received for grants or tuition reductions that pay for teaching, research or other services, required as a condition for receiving such amounts, may not be excluded from income.  This will be the case even if all degree candidates in a particular program are required to perform such services.

Finally, federal grants received by a candidate in return for the individual performing future work with the federal government, generally may not be excluded (however, there may be limited, specific exceptions under certain programs).

Taxation of Prizes and Awards

A lot of taxpayers are still unaware that awards and prizes may be potentially subject to U.S. federal income taxation.

In general, prizes and awards (other than certain types of fellowship grants and scholarships) should be included in gross income and subject to federal taxation.

Awards for religious, charitable, scientific, educational, artistic, literary or civic achievement are excluded from gross income only if the award is transferred unused by the payor to a governmental unit or a tax-exempt organization (charitable, religious, or educational) designed by the recipient.

The recipient of the award must be selected for the contest or proceeding without any of his action (or any action on his behalf).  Moreover, the recipient cannot be required to render substantial future services as a condition to receiving the prize or award.

Employee achievement awards are excludable from gross income only to the extent that the cost of the award is deductible by the employer.  It is important the awards do not represent disguised compensation.  The amounts subject to exclusion from gross income cannot be more than $400 for non-qualified awards and $1,600 for qualified awards (see IRC Sections 74 and 274(j) for further details).

Social Security Wage Base Increase in Tax Year 2012

In November of 2011, the Social Security Administration announced that the wage base (also known as “contribution and benefit base”) used for computing the social security tax is increased to $110,100 in the tax year 2012.  The wage base is used to compute the maximum amount of income subject to the Social Security taxes.

This is the first increase since 2009.  From 2009 through 2011, the wage base was $106,800.

Similarly, the earnings needed to earn one Social Security credit also slightly increased to $1,130 in 2012 (in 2011, it was $1,120).