IRS Ends Automatic Extension of W-2 Information Returns to Combat Identity Theft.

(Parker Tax Publishing August 21, 2015)

Effective July 1, 2016, the IRS will end the automatic extension of time to file information returns on forms in the W-2 series (except Form W-2G). The IRS will also plans to end automatic filing extensions for all other information returns included under Reg. Sec. 1.6081-8T at an undetermined date that will be no earlier than January 1, 2018. T.D. 9730, REG-132075-14.

Background

Currently Reg. Sec. 1.6081-8 provides an automatic 30-day extension of time to file information returns on forms in the W-2 series (including Forms W-2, W-2AS, W-2G, W-2GU, and W-2VI), 1095 series, 1098 series, 1099 series, and 5498 series, and on Forms 1042-S and 8027, and allows an additional 30-day non-automatic extension of time to file those information returns in certain cases.

Although paper information returns are generally due to be filed by February 28, an extension of time to file may extend the due date until the end of March or, if a non-automatic extension is also granted, the end of April.

Similarly, although electronically-filed information returns are generally due by March 31, an extension of time to file may extend the due date until the end of April or, if a non-automatic extension is also granted, the end of May.

According to the IRS, identity thieves often electronically file their fraudulent refund claims early in the tax filing season, using fictitious wage and other information of legitimate taxpayers. Unscrupulous preparers also electronically file early in the tax filing season, over-claiming deductions and credits and underreporting income for unwitting, as well as complicit, taxpayers. In many cases, the IRS is unable to verify the wage and other information reported on tax returns filed before April 15th, in part because the IRS does not receive the information returns reporting this information until later in the filing season. Receipt of information returns earlier in the filing season will improve the IRS's ability to identify fraudulent refund claims and stop the refunds before they are paid.

Temporary and Proposed Regulations Remove Automatic Extensions

Effective July 1, 2016, T.D. 9730 removes Reg. Sec. 1.6081-8 and replaces with new Reg. Sec. 1.6081-8T.

The temporary regulations in Reg. Sec. 1.6081-8T are substantially identical to current Reg. Sec. 1.6081-8 that will be removed, except that the temporary regulations:

(1) add information returns on forms in the 1097 series and Forms 1094-C, 3921, and 3922 to the list of information returns with procedures prescribed by regulations for the extension of time to file;

(2) remove information returns on forms in the W-2 series (except Form W-2G) from the list of information returns eligible for the automatic 30-day extension of time to file, providing instead a single 30-day non-automatic extension of time to file those information returns; and

(3) clarify that the procedures for requesting an extension of time to file in the case of forms in the 1095 series apply to information returns on Forms 1095-B and 1095-C (but not 1095-A).

The IRS notes that removing the automatic 30-day extension of time to file for information returns on forms in the W-2 series is an affirmative step to accelerate the filing of information returns so they are available earlier in the filing season for use in the IRS's refund fraud detection processes. These information returns are particularly helpful to the IRS for identifying fraudulent identity theft refund claims and preventing their payout.

The IRS intends to eventually remove the automatic 30-day extension of time to file the other forms listed in Reg. Sec. 1.6081-8T and replace it with a single non-automatic 30-day extension of time to file. Therefore, proposed regulations in REG-132075-14 (8/13/15) would remove the automatic 30-day extension of time to file these other information returns. As currently drafted, the proposed regulations would affect information returns due January 1 of the year beginning after the regulations are finalized, but those final regulations will not be effective any earlier than January 1, 2018. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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