2015 Saw Significant Tax Law Changes

2015 Saw Significant Tax Law Changes

Steep Increases in Information Reporting Penalties Set to Take Effect in January

On June 29, President Obama signed into law the Trade Preferences Extension Act of 2015 (Pub. L. 114-27). The law significantly increases, for the second time in five years, the penalties imposed under Code Secs. 6721 and 6722 for failures relating to information returns and payee statements. These increases take effect on January 1, 2016.

For each information return or payee statement with respect to which a failure occurs, the penalty has been increased from $100 to $250, and the maximum penalty that may be imposed has increased from $1,500,000 to $3,000,000.

The lower maximum penalties for taxpayers with gross receipts of $5,000,000 or less has also been increased. For such taxpayers, the maximum penalty is now $1,000,000, up from $500,000.

For taxpayers who intentionally disregard the filing requirements for information returns and payee statements, the per failure penalty increased from $250 to $500.

Common forms subject to these penalties include: Schedule K-1 (Forms 1041, 1065, and 1120S); Form 1098, Mortgage Interest Statement; Form 1098-E, Student Loan Interest Statement, Form 1099-C, Cancellation of Debt; Form 1099-INT, Interest Income; Form 5498, IRA Contribution Information; and Form W-2, Wage and Tax Statement.

Congress Swaps Partnership and C Corp Deadlines

On July 31, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (Pub. L. 114-41), which restructures the due dates for Partnership and C corporation tax returns beginning with the 2016 tax year, with a goal of reducing the need for extended and amended tax returns.

Once the new rules take effect, partnerships will be required to file their returns by the 15th day of the third month following the close of a tax year. For calendar year partnerships, the due date will be March 15, instead of April 15.

Transportation Bill Allows IRS to Use Private Debt Collectors

On December 3, Congress passed the Fixing America’s Surface Transportation (FAST) Act (H.R. 22). The President is expected to sign the bill into law.

The FAST act funds federal surface transportation programs for the next five years (through fiscal year 2020), paid for in part by tax provisions.

The act amends Code Sec. 6306 to allow the IRS to use private debt collection agencies to locate and contact delinquent taxpayers, and to arrange for payment of those taxes.

In addition, the IRS is required to use amounts marked for collection enforcement activities under Code Sec. 6306 to fund a “special compliance personnel program” under new Code Sec. 6307 in order to hire, train, and employ individuals to use automated collection systems or as field collection officers.

The act also adds new Code Sec. 7345, which calls for the denial, revocation, or limitation of a passport for any individual with a delinquent tax debt in excess of $50,000.

Discharge of Corinthian College-Related Student Loans Won’t Result in Taxable Income

Effective for tax years beginning on or after January 1, 2015, the IRS has stated that it will not require taxpayers who took out federal student loans to finance attendance at a school owned by Corinthian Colleges, Inc. to recognize gross income as a result of the discharge of such loans under the Department of Education’s “Defense to Repayment” discharge process. Rev. Proc. 2015-57.