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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

Reminder of the Federal Refund Delay for Upcoming 2018 Filing Season
Dec 13, 2017

Preparer Due Diligence Requirement Expansion Reminder
Nov 30, 2017

PTIN Renewal and Last Day to File a Return Electronically
Nov 13, 2017

Hurricane Relief Tax Law Changes
Nov 1, 2017

Important Upcoming IRS Update to e-Services Accounts
Oct 10, 2017

Tax and Financial Relief Options for Flood Victims
Sept 5, 2017

Warning to Tax Preparers of New Phishing Scam that is Attempt to Steal Passwords
Aug 8, 2017

IRS Security Summit Launches “Don’t Take the Bait” Education Campaign Aimed at Tax Preparers
Aug 1, 2017

IRS Announces Which ITINs Will Be Expiring at End of 2017 and That They Are Now Accepting Renewal Applications
July 27, 2017

IRS Use of Private Debt Collection Agencies
June 20, 2017

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