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W-2 Extensions Out, Taxing Identity Protection, CT Probate Fees Rise

Berdon Tax Team 09.28.2015 | eVisor

Automatic Extensions for W-2 Forms Being Eliminated

Under existing rules, taxpayers are generally permitted an automatic 30-day extension to file information returns, including the W-2 Form series.  Those receiving an automatic extension are further permitted to apply for an additional 30-day extension. However, recently proposed and temporary regulations are designed to severely curtail these extensions - a serious blow particularly for business taxpayers.

The elimination of automatic extensions and the narrowing of the criteria for extensions with permission will make compliance with the information reporting rules that much harder for business taxpayers.  This shortening of the filing period comes on top of a recent change in legislation to drastically increase the penalties for late filing of information returns.

For W-2 extensions, the ability to file for an automatic extension will be eliminated on December 31, 2016.  Instead, a single 30-day extension will be available by application for the 2017 filing season and later. The IRS has warned taxpayers that grants of extensions after 2016 will be limited to extraordinary circumstances or catastrophes. The change in the extension procedures is being made to help the IRS combat identity theft.

The IRS has stated that it intends to eventually eliminate automatic extensions for all information returns and replace them with a single, non-automatic 30-day extension. However, this change will not be effective earlier than December 31, 2017.

Questions? Contact your Berdon advisor.

IRS Addresses the Taxability of Identity Protection Services

In the harsh reality of the identity fraud era, employers are taking steps to protect the safety of private information.  In a welcome bit of relief and clarity, the IRS has issued Announcement 2015-22 stating it will "not assert that an individual whose personal information may have been compromised in a data breach must include in gross income the value of the identity protection services provided by the organization that experienced the data breach."  Further, employers providing identity protection services will not be required to report the value of those services on information returns such as W-2s and 1099s.

Of course, there are exceptions.  For example, identity protection services provided for reasons other than a data breach are not covered under the announcement.  Additionally, cash received in lieu of these services continues to be taxable income.  The IRS has requested comments from interested parties on the first exception by October 13, 2015.  It will consider issuing additional guidance for those situations depending on the response.

Questions? Contact your Berdon advisor.

New Estate Tax Reporting Requirements Delayed

New estate tax reporting requirements imposed by the recent transportation spending act1 (the Act) have been delayed until February 29, 2016.

Under the Act, if property is included in the decedent's estate, any estate required to file federal estate tax returns must also provide the IRS with information returns, along with payee statements to any persons acquiring an interest in the property from the estate. These statements must identify the estate tax value of each such property interest acquired by a transferee.  Originally, the Act required the statements to be filed 30 days after the date on which the estate tax return was required to be filed, including extensions. The delay gives the IRS and Treasury Department time to issue guidance on how to carry out these requirements. 

1 The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, H.R. 3236

Questions? Contact your Berdon advisor or Scott Ditman, CPA/PFS at 212.331.7464 | sditman@berdonllp.com  or Marco Svagna at 212.331.7644 |msvagna@berdonllp.com 

State Tax

Connecticut Substantially Increases Probate Fees for Larger Estates

Under recent legislation, the large estates of Connecticut residents dying on or after January 1, 2015 are being hit with sizable increases in probate court fees.  Estates totaling less than $2 million are not affected and those in the $5 million range will see a relatively small increase in the probate court fee.

The fees are computed based on a percentage of assets reported on the estate's Connecticut estate tax return and are imposed regardless of whether the assets are probated.

Prior to the legislation, probate court fees were capped at $12,500 for all estates regardless of their value.  The new legislation eliminates that cap and increases the percentage applied to estate assets in excess of $2 million from .25% to .50% while lower rates apply to the first $2 million of assets. The result is in an increase in fees for estates in excess of $2 million and a substantial increase in fees for larger estates. that previously benefited from the cap. 

Example: Prior to this legislation, a $20 million estate would have paid a probate court fee of $12,500.  With the fee increase, that same estate will now pay a fee of $95,615!

Questions? Contact your Berdon advisor or Marco Svagna, CPA at 212.331.7644 |msvagna@berdonllp.com.