Taxpayer Refunds Moved Back
Employers W-2 Deadline Moved Up
The Dates: Filing Season Begins and Tax Returns Are Due
The Internal Revenue Service has announced that the U.S. tax season will begin on Monday, January 23, 2017. That is the day the IRS will begin accepting electronic tax returns.
Taxpayers will enjoy a bit of a reprieve on the filing deadline. A combination of April 15 falling on a Saturday and a DC legal holiday on the following Monday permits individual taxpayers to file by Tuesday, April 18 rather than the usual April 15. (While taxpayers may delay filing to take advantage of the extended deadline, Ed and the staff are already anticipating the last minute scurry to meet the cut off date for procrastinating clients.J)
Filing is Not the Only Date Delayed
Effective the first of this year, a new law requires the IRS to hold refunds a few weeks for some early filers. Specifically, taxpayers who claim the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) are those who will be affected. The hold is anticipated to be at least through February 15, 2017. It's important to note that the IRS will hold the entire refund, not solely the portion associated with those credits.
This change helps ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent fraud.
"We don't want people caught by surprise if they get their refund a few weeks later than previous years," said IRS Commissioner John Koskinen in the IRS announcement.
If you are affected, it is important to realize that refunds due will require several days to be processed through financial institutions. A quick look at the calendar will show that weekends and the Presidents Day holiday may further delay refunds until the week of February 27.
A couple of additional notes regarding the above.
1. Tax preparers now must complete and maintain a "Due Diligence Checklist" that supports refund claims for the EITC, ACTC and the American Opportunity Tax Credit (AOTC). Failure to comply will result in a significant financial penalty. So, if you seek to apply for these refunds, plan on being asked for additional proof of your claim by your tax preparer.
2. Keep in mind that the "hold" refers only to a delay in processing claims. Tax returns will be reviewed by the IRS prior to that date in the order received. So no need to wait; file your return as soon as you can and ensure a preferred placement in the queue.
Employers - Accelerated Filing Dates - W-2 & 1099-MISC Forms
The Protecting Americans from Tax Hikes (PATH) Act, delivered on dozens of tax relief benefits for both individuals and businesses. Also, included in the Act are provisions that require employers to accelerate filing W-2 forms no later than January 31. That is a change from previous deadlines, i.e. end of February, if filing paper forms, or end of March, if filing electronically.
This change in dates will bring into alignment the long-held requirement to provide copies of the W-2 Form to employees by January 31. That has not changed.
Additionally, the new deadline applies to Forms 1099-MISC reporting non-employee compensation, typically annual payments of $600 or more to independent contractors.
"As tax season approaches, the IRS wants to be sure employers, especially smaller businesses, are aware of these new deadlines," said IRS Commissioner John Koskinen. "We are working with the payroll community and other partners to share this information widely."
This application of the new law is reported by the IRS as an added attempt to thwart identity theft issues. Incidences of identity theft continue to escalate. The IRS and state tax administrators are initiating additional review time to protect taxpayers against fraud. Those safeguards will be further enhanced for the upcoming 2017 filing season.
Strengthening identity theft and refund fraud protections will likely result in additional review time of some tax returns in 2017 ... with accompanying delays in refunds. That said, The IRS maintains it anticipates issuing more than nine out of 10 refunds in less than 21 days,
"We want people to be aware we are taking additional steps to protect taxpayers from identity theft, and that sometimes means the real taxpayers face a slight delay in their refunds," IRS Commissioner John Koskinen said.
The provisions of the PATH Act relating to these measures aims to make it easier for the IRS to detect and prevent refund fraud. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them.
Consequences of Non-compliance by Employers
Many employers have taken a relaxed position when it came to filing W-2 and 1099 Forms. The motivation was fueled by rare occurrences when the IRS penalized late submissions. The IRS is now taking a more aggressive stance. The failure-to-file and late filing penalties are virtually doubled.
A failure-to-file violation may include the following:
• Not filing by the due date
• Not furnishing a copy of the form to the recipient
• Incomplete or incorrect information
Penalties are even more onerous since they apply to both the copy filed with the IRS and the copy provided to the recipient. And small businesses are not immune. While those with annual gross revenue not exceeding $5 million will incur a reduced penalty, it will still be about double under the old rules.
Fines may be levied for late filings of W-2s at $50 per form. Late filing of 1099s range from $30 to $100 per form depending on how late the filing occurs.
So, increased penalties for failure-to-file and unlimited fines for deliberate disregard to file makes it incumbent upon business leaders to conform to the new regulations, or pay an exorbitant price for non-compliance.
If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that we can help. Give us a call or drop us an email. We'll respond immediately.