United States

IRS eliminates certain extensions for Form W-2 and 1099-MISC

One 30-day, non-automatic extension of time will be available

TAX ALERT  | 

On Wednesday, Aug. 1, 2018, the Department of the Treasury issued final regulation T.D. 9838 under section 6081 (governing extensions of time to file information returns), which provide for a single, non-automatic 30-day extension of time to file information returns in the Form W-2 series (other than Form W-2G) and all nonemployee compensation returns (currently Form 1099-MISC, box 7). For certain other information returns, discussed below, the regulations provide for one automatic, 30-day extension of time plus one additional, non-automatic 30-day extension of time. The regulations, to be published at reg. section 1.6081-8, take effect on Friday, Aug. 3, 2018, but apply to information returns due to be filed after Dec. 31, 2018.

Background

The federal income tax system is one of voluntary compliance: each year taxpayers submit returns to the IRS (for individual taxpayers on Form 1040) which substantiate the amount of tax owed to, or refund due from, the IRS. The IRS verifies the accuracy of the information reported on these returns by, among other mechanisms, electronically cross-referencing the taxpayer’s claimed income information with that supplied by employers and service providers on various information returns, such as forms in the W-2 series. If the amounts do not match, an examiner is likely to investigate the discrepancy.

In recent years, identity thieves and unscrupulous taxpayers have attempted to secure unlawful refunds by filing fraudulent or inaccurate returns early in the return filing season, before the federal government has received corresponding information returns from employers and service providers. In 2015, the IRS took steps to combat this practice by advancing a package of temporary and proposed regulations which restricted the extensions of time available to file information returns on forms in the W-2 series (other than W-2G, regarding gambling winnings) to a single, 30-day period.

August 2015 regulatory package

The temporary regulations, reg. section 1.6081-8T, provided that for information returns due to be filed after Dec. 31, 2016, only a single, non-automatic extension of time to file would be permitted for all forms in the W-2 series (other than Form W-2G). To obtain this non-automatic 30-day extension to file Forms W-2, the taxpayer requesting the extension needed to timely submit Form 8809 and complete an attestation which (a) requires return preparers to sign under penalty of perjury that (b) one of four enumerated reasons for the extension listed in box 7 of Form 8809 applies to the taxpayer. Under the 2015 regulations, Form 1099-MISC was not subject to this attestation requirement for the first request for an extension of time. For Form 1099-MISC and other information returns other than forms in the W-2 series, an explanation was not required for the first 30-day extension request, but a signed attestation in accordance with the above was required for the second 30-day request.

At the same time as the temporary regulations were issued a proposed regulation was issued which would have made all information returns covered under the then reg. section 1.6081-8 subject to a single, non-automatic 30-day extension of time to file. The proposed regulation generally cited the policy concerns regarding identity theft and fraud expressed above.

T.D. 9838 (Aug. 1, 2018)

The final regulation terminates the temporary regulation 1.6081-8T, but extends its practical effect in so far as only a single, non-automatic extension of time to file will be permitted for Forms W-2 (other than W-2G). Critically, however, the final regulation adds nonemployee compensation returns (currently box 7 of Form 1099-MISC) to the list of forms for which no automatic, 30-day extension is available.

Citing various considerations raised by commentators, the final regulations reject the proposed regulations’ broad elimination of the automatic extension for all information returns, providing that (at least for now) only the Forms W-2 and forms reporting nonemployee compensation should be so limited.

Thus, under the final regulation, the following information returns will be eligible for one automatic 30-day extension of time to file, plus one additional, non-automatic 30-day extension of time:

Form

Description

Form W-2G Certain Gambling Winnings
Form 1042-S Foreign Person's US Source Income Subject to Withholding
Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
Form 1095-B Health Coverage
Form 1095-C Employer-Provided Health Insurance Offer and Coverage
Form 3921 Exercise of an Incentive Stock Option Under Section 422(b)
Form 3922 Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)
Form 8027 Employer's Annual Information Return of Tip Income and Allocated Tips
Form 1097 Series Bond Tax Credits
Form 1098 Series Mortgage Interest
Form 1099 Series
(other than 1099-MISC with box 7 comp)
Non-wage income
Form 5498 Series IRA Contribution Information

 

Key takeaway

While the regulation largely preserves the status quo, the elimination of the automatic 30-day extension for forms reporting nonemployee compensation is notable. Clients with significant nonemployee reporting obligations should be prepared to conform their reporting process to the applicable filing deadlines (generally Jan. 31 of the calendar year following the calendar year for which the information is being reported) in anticipation of the unavailability of an automatic extension of time to file, and the inability to obtain an extension beyond 30 days.

The new regulations will appear at reg. 1.6081-8. Form 8809 will be updated for the 2019 tax year.

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