The Internal Revenue Service (IRS) has reminded employers and small businesses of the new Jan. 31 filing deadline for Forms W-2. In addition, the IRS must also hold some refunds until Feb. 15.
Why? A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate the W-2 filing deadline and also requires the IRS to hold refunds involving two key refundable tax credits until at least Feb. 15.
Tool #1 — Jan. 31 filing deadline
The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, requires employers to file their copies of Form W-2, submitted to the Social Security Administration, by Jan. 31. The new Jan. 31 filing deadline also applies to certain Forms 1099-MISC, reporting non-employee compensation such as payments to independent contractors.
In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms.
The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.
In addition, there are changes in requesting an extension to file Form W-2. Only one 30-day extension is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as it is known that an extension is necessary, but no later than Jan. 31. Carefully review the instructions for Form 8809 for more information.
The Jan. 31 deadline for employers furnishing copies of these forms to their employees remains unchanged.
Tool #2 — Some refunds delayed until at least Feb. 15
Due to the PATH Act change, some people will get their refunds a little later. The new law requires the IRS to hold until Feb. 15 the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). By law, the IRS must hold the entire refund, not just the portion related to the EITC or ACTC. Even with this change, taxpayers should file their returns as they normally do.
Whether or not claiming the EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Though the IRS issues more than nine out 10 refunds in less than 21 days, some returns are held for further review.
Have questions about upcoming tax deadlines and how the PATH Act may impact your business? Contact an MCB Tax Advisor today to discuss tax deadlines, changes and tax planning strategies.