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Tax Year 2016 Business Income Tax Deadlines

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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.

Individual IRS Tax Deadlines in the Calendar Year 2016

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As the New Year festivities are drawing to an end, the attention of hundreds of millions of US taxpayers focuses more and more on its annual US tax compliance in the calendar year 2016. In this brief article, I would like to summarize some of the most important deadlines of the calendar year 2016. Obviously, other calendar year 2016 deadlines may also apply to you depending on your situation; please, consult your tax attorney for a detailed review of your US tax requirements.

January 15, 2016: Form 1040-ES for the final installment of estimated tax payments for the tax year 2015.

February 1, 2016: If you did not make your final estimated tax payment by January 15, 2016, you can still avoid the penalty by filing your 2015 US tax return by February 1, 2016.

April 18, 2016: Three important deadlines fall on this date.

First, due to the fact that April 15 falls on Saturday and the following Monday (April 17) is a federal holiday, the US taxpayers will receive a few extra days to file their 2015 individual tax returns by April 18, 2016.

Second, April 18 is also the deadline for the first installment of 2016 estimated tax payments that should be filed with Form 1040-ES.

Third, April 18 is the deadline for filing the automatic 6-month extension to file 2015 income tax return. The extension is done by filing Form 4868 with the IRS. Remember, the estimated tax liability must still be paid by April 18 (i.e. the extension applies to the return filing deadline, not to the actual income tax payment).

June 15, 2016: this is a dual deadline for US individual taxpayers who reside outside of the United States. First, June 15 is the 2015 income tax return filing deadline for such individuals. Second, if these US individual taxpayers do not yet desire to file their 2015 individual income tax returns, then they can file an automatic four-month extension by June 15, 2016. Similar to April 18 extensions, however, the estimated 2015 income tax liability must still be paid by June 15, 2016.

Furthermore, June 15, 2016, is the deadline for the second installment for 2016 estimated tax payments.

June 30, 2016: FinCEN Form 114, commonly known as FBAR (Report of Foreign Bank and Financial Accounts), is due for the calendar year 2016. This is one of the most important international tax deadlines and no extensions are allowed.

September 15, 2016: this is the deadline for the third installment for 2016 estimated tax payments.

October 17, 2016: if the filing extensions to file 2015 individual income tax returns were properly filed, these returns will be due on October 17, 2016 (normally, the deadline would be on October 15, but it falls on a Saturday in the 2016 and the deadline shifts to the following Monday).

Interest Rates for the Fourth Quarter of 2015 and First Quarter of 2016

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The IRS underpayment and overpayment interest rates are highly important in US tax law in general, and offshore voluntary disclosures in particular. Not only do these rates determine the interest on additional tax liability on the amended tax returns, but the same rates are sued to determine the PFIC interest rate on “excess distributions”. During the fourth quarter of 2015 and the first quarter of 2016, the IRS underpayment and overpayment interest 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 (IRC), the interest rates are 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.

IRS 2016 Standard Mileage Rates for Business, Medical and Moving

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On December 17, 2015, the IRS issued its 2016 standard mileage rates to calculate deductible automobile operation costs for business, charitable, medical or moving purposes.

The 2016 standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

54 cents per mile for business miles driven, down from 57.5 cents for 2015
19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
14 cents per mile driven in service of charitable organizations

These 2016 standard mileage rates are effective January 1, 2016 and they are optional; taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

There are some circumstances where a taxpayer cannot use the business standard mileage rate. These exceptions include where a vehicle is depreciated using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. Furthermore, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

The 2016 Standard Mileage Rates apply to the vehicles that the taxpayers own or lease (though, there may be additional complications if the vehicle is leased). In addition to standard mileage rates, taxpayers may also deduct, as separate items: parking fees and tolls attributable to the use of a car for business purposes; interest related to the business purchase of a car; state and local personal property taxes (to the extent allowed by IRC Sections 163 and 164).

Parking fees and tools are also available for deduction, as separate items, for the use of a car for charitable, medical, or moving expense purposes. The interest related to the purchase of a car and state/local property taxes are not deductible as charitable, medical or moving expenses; however, they may be deducted as separate items to the extent allowed by IRC Sections 163 and 164.

IRS Notice 2016-01 contains the 2016 standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

US Tax Return Statute of Limitations and IRC Section 6501(c)(8)

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Most tax practitioners are familiar with the general rules of assessment statute of limitation for US tax returns. However, very few of them are aware of the danger of potentially indefinite extension of the statute of limitations contained in IRC Section 6501(c)(8). In this article, I would like to do offer a succinct observation of the impact of IRC Section 6501(c)(8) on the US tax return Statute of Limitations as well as your offshore voluntary disclosure strategy.

Background Information

While IRC Section 6501(c)(8) has existed for a while, its present language came into existence as a result of the infamous HIRE act (the same that gave birth to FATCA) in 2010. The major amendments came from PL 111-147 and PL 111-226.

When IRC Section 6501(c)(8) Applies

IRC Section 6501(c)(8) applies when there has been a failure to by the taxpayer to supply one or more accurate foreign information return(s) with respect to reporting of certain foreign assets and foreign-related transactions under IRC Sections 1295(b), 1298(f), 6038, 6038A, 6038B, 6038D, 6046, 6046A and 6048. In essence, it means IRC Section 6501(c)(8) applies whenever the taxpayer fails to file Forms 8621, 5471, 5472, 926, 3520, 3520-A, 8865, 8858 and 8938 (and potentially other forms). In essence, this Section comes into play with respect to virtually all major international tax reporting requirements, with the exception of FBAR (which is governed by its own Title 31 Statute of Limitations provisions).

It is important to emphasize that it is not just the failure to file these international tax returns that triggers IRC Section 6501(c)(8). Rather, most international tax attorneys agree that, if the filed international tax returns are inaccurate or incomplete, IRC Section 6501(c)(8) still applies.

IRC Section 6501(c)(8) only applies to the returns filed after the date of the enactment of the provisions that amended the section – March 18, 2010. The Section also applies to returns filed on or before March 18, 2010 if the statute of limitations under Section 6501 (without regard to the amendments) has not expired as of March 18, 2010.

The Impact of IRC Section 6501(c)(8) On the Statute of Limitations

As amended by PL 111-147 and PL 111-226, IRC Section 6501(c)(8) may have a truly monstrous effect on the statute of limitations for the entire affected tax return – a failure to file any of the aforementioned international tax forms (including a failure to provide accurate and complete information) will keep the statute of limitations open indefinitely with respect to “any tax return, even, or period to which such information relates”.

Thus, a failure to file a foreign information return may keep the statute of limitations open forever for the entire tax return, not just that particular foreign information return. This means that the IRS can potentially audit a taxpayer’s return and assess additional taxes outside of the usual statute of limitations period; the IRS changes can affect any item on the US tax return, not just the items on the foreign information return.

Reasonable Cause Exception to the “Entire Case” Rule

IRC Section 6501(c)(8)(B) provides a limited exception to the “entire case” rule. Where a taxpayer establishes that the failure to file an accurate international information return was due to a reasonable cause and not willful neglect, only the international tax forms will be subject to indefinite statute of limitations and not the entire return.

Impact of IRC Section 6501(c)(8) on Your Voluntary Disclosure Strategy

IRC Section 6501(c)(8) may have a significant impact on the voluntary disclosure strategy where multiple international tax forms need to be filed. In these cases, the taxpayers are more likely to go into Streamlined disclosures or 2014 OVDP (now closed) rather than attempt doing a reasonable cause disclosure.

This is the case because this indefinite statute of limitations may undermine a reasonable cause strategy if the disclosure period does not coincide with the years in which the international tax returns were due. For example, let’s suppose that US citizen X owned PFICs during the years 2008-2014, but he never filed Forms 8621 even though they were required. If X decides to do a reasonable cause disclosure and files amended 2012-2014 tax returns only, then, the years 2008-2011 will still be open to an IRS audit (though, if X successfully establishes reasonable cause for the earlier non-filing, only Forms 8621 will be subject to an IRS audit). In this case, X may have to make a choice between an unpleasant filing of amended 2008-2011 tax return or doing a Streamlined disclosure.

Obviously, IRC Section 6501(c)(8) is just one factor in what could be a very complex maze of pros and cons of a distinct voluntary disclosure strategy. Other factors need to be taken into effect in determining, including whether the financials were disclosed on the FBAR and Form 8938 and the amounts of underreported income (which may actually keep the statute of limitations open for the years 2009-2011 as well).

These types of decisions need to be made carefully by a tax professional on a case-by-case basis with detailed analysis of the facts and potential legal strategies; I strongly recommend retaining an experienced tax attorney for the creation and implementation of your voluntary disclosure strategy.

Contact Sherayzen Law Office for Help With Your Delinquent International Tax Forms

If you have not filed international tax forms and you were required to do so, contact the professional international tax team of Sherayzen Law Office. Our team is lead by an experienced international tax attorney, Mr. Eugene Sherayzen, and has helped hundreds of US taxpayers around the world to bring their US tax affairs into fully US tax compliance.

Contact Us Today to Schedule Your Confidential Consultation!