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Federal Tax Law Changes that will Affect 2016 Federal Returns

December 7, 2016


The following are changes to areas of the federal tax law that will affect 2016 federal income tax returns for the upcoming 2017 filing season.

Delay in Refunds for Federal returns claiming EITC or Additional Child Tax Credit
Beginning with the 2017 filing season, refunds for tax returns that claim EITC or the Additional Child Tax Credit will be held until February 15.

Therefore, any return that claims one of these credits that is prepared in the early part of the filing season will not be deposited until just after February 15 instead of in the normal timeframe.

See the IRS news release IR-2016-152 of November 22, 2016 for further information on this delay in refunds.

Earned Income Tax Credit (EITC)

  • Taxpayers can no longer file an amended return to claim the EITC for any year a qualifying child did not have a Social Security Number.
  • Taxpayers whom the IRS finds have fraudulently claimed the credit can now be barred from claiming EITC for 10 years.
  • If the IRS finds that EITC has been erroneously claimed, the following penalties will apply:
    • Penalty for erroneous claim for refunds and credits
    • Underpayment penalty

Child Tax Credit and American Opportunity Education Credit

  • These two credits are now subject to the same due diligence requirements as EITC. This is reflected on the revised 2016 Form 8867 (Preparers Due Diligence Checklist). This also means that the Form 8867 must be attached to tax returns that are claiming the Child Tax Credit and/or the American Opportunity Credit.
  • The IRS can bar a taxpayer from claiming the Child Tax Credit and American Opportunity Education Credit for two years if they have determined the individual has intentionally disregarded the rules for claiming either of these two credits.
  • If the taxpayer elects to exclude from gross income any amount of foreign earned income or foreign housing costs, the taxpayer may not claim the refundable portion of the Child Tax Credit.
  • Taxpayers can no longer file an amended return to claim either of these credits for any year the qualifying child did not have a Social Security Number or ITIN.

Due Dates for Federal Corporate and Partnership Returns
The due dates for federal C Corporations and Partnership returns have been changed as follows:

  • C Corporations (Form 1120)
    • Calendar year end - April 15
    • Fiscal year end - 15th day of the fourth month after the year end
  • Partnerships (Form 1065)
    • Calendar year end - March 15
    • Fiscal year end - 15th day of the third month after the year end

Recent Tax Updates

Revised 2018 Schedule A due to Tax Cuts and Jobs Act Changes to Itemized Deductions
August 29, 2018

2018 Expansion of Preparer Due Diligence Requirements
August 8, 2018

IRS Accepting Renewal Applications for ITINs Expiring at End of 2018
July 25, 2018

IRS Tax Security 101 Campaign for Preparers
July 18, 2018

Form 1040 Redesign
July 11, 2018

Recent Scams Targeting Preparers and Taxpayers to be Aware Of
June 6, 2018

Additional Updates
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PUTTING CUSTOMERS FIRST SINCE 1974
PUTTING CUSTOMERS FIRST SINCE 1974