Extension of Time To File Certain Information Returns, 38023-38029 [2018-16717]
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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations
collection of information, including
suggestions for reducing the burden, to
Jasmeet K. Seehra, Office of
Management and Budget, by email at
jseehra@omb.eop.gov or by fax to (202)
395–7285.
3. This rule does not contain policies
with Federalism implications as that
term is defined under Executive Order
13132.
4. The provisions of the
Administrative Procedure Act (5 U.S.C.
553) requiring notice of proposed
rulemaking and the opportunity for
public participation, and a delay in
effective date, are inapplicable because
this regulation involves a military or
foreign affairs function of the United
States (see 5 U.S.C. 553(a)(1)). This rule
implements a necessary update of the
status of South Sudan as a U.S.
embargoed country, consistent with the
prohibitions implemented in the ITAR
by the Department of State. This rule
also serves to prevent confusion by the
public as to the current EAR export and
reexport license requirements
applicable to South Sudan. A delay in
the effective date would frustrate the
achievement of this goal. Further, no
other law requires that a notice of
proposed rulemaking and an
opportunity for public comment be
given for this rule. Because a notice of
proposed rulemaking and an
opportunity for public comment are not
required to be given for this rule under
5 U.S.C. 553, or by any other law, the
requirements of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) are
not applicable.
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DEPARTMENT OF THE TREASURY
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Administrative practice and
procedure, Exports, Reporting and
recordkeeping requirements.
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1. The authority citation for part 740
continues to read as follows:
■
Authority: 50 U.S.C. 4601 et seq.; 50 U.S.C.
1701 et seq.; 22 U.S.C. 7201 et seq.; E.O.
13026, 61 FR 58767, 3 CFR, 1996 Comp., p.
228; E.O. 13222, 66 FR 44025, 3 CFR, 2001
Comp., p. 783; Notice of August 15, 2017, 82
FR 39005 (August 16, 2017).
2. Amend Supplement No. 1 to Part
740 by adding, in alphabetical order, an
entry for ‘‘South Sudan, Republic of’’
under ‘‘Country Group D’’ to read as
follows:
■
SUPPLEMENT NO. 1 TO PART 740—
COUNTRY GROUPS
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Final regulations and removal of
temporary regulations.
ACTION:
This document contains final
regulations providing rules regarding
the automatic and non-automatic
extension of time to file certain
information returns. These changes are
being implemented to accelerate the
filing of the Form W–2 series (except
Form W–2G) and forms that report
nonemployee compensation (currently
Form 1099–MISC with information in
box 7) so they are available earlier in the
filing season for use in the IRS’s identity
SUMMARY:
26 CFR Part 1
[TD 9838]
BILLING CODE 3510–33–P
RIN 1545–BM49
Extension of Time To File Certain
Information Returns
Internal Revenue Service (IRS),
Treasury.
AGENCY:
23:08 Aug 02, 2018
PART 740—[AMENDED]
Internal Revenue Service
[FR Doc. 2018–16612 Filed 8–2–18; 8:45 am]
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Accordingly, part 740 of the Export
Administration Regulations (15 CFR
parts 730–774) is amended as follows:
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ER03AU18.002</GPH>
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Dated: July 26, 2018.
Richard E. Ashooh,
Assistant Secretary for Export
Administration.
List of Subjects in 15 CFR Part 740
38023
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theft and refund fraud detection
processes. In addition, these final
regulations update the list of
information returns subject to the rules
regarding extensions of time to file.
These regulations affect filers requesting
an extension of time to file the affected
information returns.
DATES: Effective date: These regulations
are effective on August 3, 2018.
Applicability date: For dates of
applicability, see § 1.6081–8(g).
FOR FURTHER INFORMATION CONTACT:
Jonathan R. Black, (202) 317–6845 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to 26 CFR part 1 under section 6081 of
the Internal Revenue Code (Code)
regarding the extension of time to file
certain information returns. On August
13, 2015, the IRS published in the
Federal Register temporary regulations
(TD 9730 (80 FR 48433)) under
§ 1.6081–8T removing the automatic 30day extension of time to file the Form
W–2 series (except Form W–2G,
‘‘Certain Gambling Winnings’’) and
providing a single non-automatic 30-day
extension of time to file these forms.
The temporary regulations also updated
the list of information returns eligible
for an extension of time to file. The
temporary regulations were applicable
for requests for extension of time to file
information returns due after December
31, 2016. The temporary regulations
were set to expire August 10, 2018, but
they are removed by this Treasury
Decision.
A notice of proposed rulemaking
(REG–132075–14 (80 FR 48472)) crossreferencing the temporary regulations
was published in the Federal Register
the same day the temporary regulations
were published. The notice of proposed
rulemaking contains proposed
regulations that would remove the
automatic 30-day extension of time to
file all information returns subject to the
rules formerly under § 1.6081–8 and
provide a single non-automatic 30-day
extension of time to file those
information returns. The IRS received
comments on the notice of proposed
rulemaking, but no public hearing was
requested or held. After consideration of
the comments, this Treasury Decision
adopts the proposed regulations only
with respect to the removal of the
automatic extension of time to file the
Form W–2 series (except Form W–2G)
and forms reporting nonemployee
compensation (currently Form 1099–
MISC, ‘‘Miscellaneous Income,’’ with
information in box 7). The automatic
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extension of time to file is retained for
Form W–2G, Form 1042–S, ‘‘Foreign
Person’s U.S. 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),’’ and Form 8027,
‘‘Employer’s Annual Information Return
of Tip Income and Allocated Tips,’’ the
Form 1097 series, Form 1098 series,
Form 1099 series (except forms
reporting nonemployee compensation),
and Form 5498 series.
I. Extension of Time To File
Information Returns
Section 6081(a) generally provides
that the Secretary may grant a
reasonable extension of time, not to
exceed 6 months, for filing any return,
declaration, statement, or other
document required by Title 26 or by
regulation. The regulations under
section 6081 generally provide rules for
extensions of time to file returns. The
regulations under § 1.6081–8 provide
specific rules for extensions of time to
file certain information returns.
For requests for extension of time to
file information returns due before
January 1, 2017, § 1.6081–8 provided
that a person required to file certain
information returns (the filer), or the
person transmitting the return for the
filer (the transmitter), could request an
automatic 30-day extension of time to
file those information returns by filing
a Form 8809, ‘‘Application for
Extension of Time to File Information
Returns’’ on or before the due date of
the information return. A filer or
transmitter was not required to sign the
Form 8809 or provide an explanation to
request the automatic 30-day extension.
Prior to expiration of the automatic
30-day extension period, a filer or
transmitter that obtained an automatic
30-day extension of time to file could
request an additional non-automatic 30day extension of time to file. Under
§ 1.6081–8, the IRS had the discretion to
grant this request if the IRS determined
that a further extension was warranted.
Unlike a request to obtain an automatic
extension, a request for a non-automatic
extension was required to be signed by
the filer or transmitter under penalties
of perjury and include an explanation of
why an additional extension of time to
file was needed. No further extensions
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of time to file were permitted under
§ 1.6081–8.
II. Temporary and Proposed
Regulations
Identity theft and refund fraud are
persistent and evolving threats to the
nation’s tax system. They place an
enormous burden on the tax system and
taxpayers. Identity thieves and
unscrupulous preparers often claim
refunds by electronically filing
fraudulent tax returns early in the tax
filing season. The IRS uses third-party
information returns to increase
voluntary compliance, verify accuracy
of tax returns, improve collection of
taxes, and combat fraud, including
refund fraud committed by those using
the stolen identities of legitimate
taxpayers. Accelerating the receipt of
third-party information returns is one
way to better enable the IRS to identify
and stop fraudulent refund claims
before they are paid.
On August 13, 2015, temporary and
proposed regulations under section
6081 were published in the Federal
Register to improve the IRS’s ability to
use third-party information returns to
combat identity theft and refund fraud.
The temporary regulation under
§ 1.6081–8T, which replaced the
regulation under § 1.6081–8 for requests
for extension of time to file certain
information returns due after December
31, 2016, removed information returns
in the Form W–2 series (except Form
W–2G) from the list of information
returns eligible for the automatic 30-day
extension of time to file and instead
provided a single non-automatic 30-day
extension of time to file those
information returns.
Section 1.6081–8T(a) retained the
rules under § 1.6081–8 for obtaining an
automatic 30-day extension of time to
file Form W–2G, Form 1042–S, Form
1095–B, Form 1095–C, Form 8027, the
Form 1097 series, Form 1098 series,
Form 1099 series, and Form 5498 series.
It also retained the additional nonautomatic 30-day extension of time to
file these information returns.
In addition, the temporary regulations
updated the list of information returns
that are eligible for automatic and nonautomatic extensions of time to file by
adding Form 1094–C, Form 3921, and
Form 3922 to the list in § 1.6081–8T(a).
As explained in the preamble to the
temporary regulations, the addition of
these forms merely updated the list to
reflect current practice at the time the
temporary regulations were published.
The proposed regulations were
broader than the temporary regulations.
The notice of proposed rulemaking
proposed to remove the automatic
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extension of time to file Forms 1042–S,
1094–C, 1095–B, 1095–C, 3921, 3922,
and 8027; to remove the automatic
extension of time to file the Form W–
2 series (including Form W–2G), Form
1097 series, Form 1098 series, Form
1099 series, and Form 5498 series; and
to allow only a single non-automatic 30day extension of time to file all of these
information returns. The proposed nonautomatic extension would have been
available on the same terms as the nonautomatic extension for the Form W–2
series in the temporary regulations. The
preamble to the proposed regulations
provided that removal of the automatic
extension would not apply to
information returns (other than the
Form W–2 series except Form W–2G)
due any earlier than January 1, 2018.
See 80 FR 48472.
III. Statutory Changes to Due Dates and
Penalties
Section 201 of the Protecting
Americans from Tax Hikes Act of 2015
(PATH Act), Public Law 114–113, Div.
Q (129 Stat. 3040, 3076), enacted on
December 18, 2015, amended section
6071 of the Code to change the due date
for filing Form W–2, ‘‘Wage and Tax
Statement,’’ and any returns or
statements required by the Secretary to
report nonemployee compensation.
Nonemployee compensation is currently
reportable in box 7 of Form 1099–MISC.
The amendments are effective for
information returns for calendar years
beginning after 2015.
Prior to enactment of the PATH Act,
the Form W–2 was required to be filed
by the last day of February (February 28
if amounts were not subject to the
Federal Insurance Contribution Act), or
March 31 if filed electronically. See
§ 1.6041–2(a)(3)(ii) and § 31.6071(a)1(a)(3)(i) (as in effect until July 20,
2017). Also prior to the enactment of the
PATH Act, the form reporting
nonemployee compensation, Form
1099–MISC, was required to be filed by
February 28, or March 31 if filed
electronically. See § 1.6041–6 (as in
effect until July 20, 2017).
As amended by the PATH Act, section
6071 provides that the due date for
filing the Form W–2 and any returns or
statements required by the Secretary to
report nonemployee compensation is
January 31 of the calendar year
following the calendar year for which
the information is being reported,
regardless of whether these information
returns are filed on paper or
electronically. Section 31.6071(a)1T(a)(3) provides this due date for the
entire Form W–2 series (except Form
W–2G). The due date for filing Form
1099–MISC that does not report
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nonemployee compensation was
unchanged by the PATH Act
amendment to section 6071, and it
remains February 28, or March 31 if
filed electronically.
Section 201 of the PATH Act also
amended section 6402 to provide that
no credit or refund of an overpayment
may be made to a taxpayer before the
fifteenth day of the second month
following the close of the taxable year
(February 15 for calendar year
taxpayers) if the Additional Child Tax
Credit (ACTC) under section 24(d) or
the Earned Income Credit (EIC) under
section 32 is allowed for such taxable
year.
In addition, section 202 of the PATH
Act amended sections 6721 and 6722 of
the Code to generally provide a $100 de
minimis error threshold ($25 for
withholding) under which the penalties
for failure to file and failure to furnish
accurate information returns and payee
statements do not apply. Payees,
however, can still elect to receive
accurate payee statements, in which
case the de minimis threshold does not
apply to the penalties for failure to file
and furnish. See section 6722(c)(3)(B).
Summary of Comments
There were eleven written comments
submitted in response to the notice of
proposed rulemaking. They are
available at https://www.regulations.gov
or upon request.
I. Comments Recommending
Alternatives To Removing the
Automatic Extension of Time To File
Information Returns
Comments stated that the automatic
extension of time to file should not be
removed for any information returns
and instead alternative or
complementary steps to reduce fraud
should be taken. Those suggested steps
include: (1) Delay the start of the filing
season or issue refunds only after the
Social Security Administration (SSA)
has transferred all Form W–2
information to the IRS; (2) require
electronic filing of all information
returns at issue; (3) reduce the threshold
requirement for filing information
returns electronically from 250 returns
to five returns; and (4) issue an identity
protection personal identification
number (IP PIN) to each known
taxpayer.
Some of these steps have already been
taken. For instance, the PATH Act
amended section 6402 so that refunds
cannot be issued before February 15 if
the EIC or the ACTC is allowed for the
taxable year. This amendment has the
effect of allowing the IRS to receive
more Form W–2 information with
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respect to these returns before issuing
refunds. Other steps, such as requiring
electronic filing of all information
returns or reducing the electronic filing
threshold, require legislation to
implement.
Comments suggesting that the IRS
delay the start of the filing season
(without regard to the February 15 date
if the EIC or the ACTC is allowed) or
issue refunds only after receiving Form
W–2 information from the SSA were not
adopted. Taxpayers who rely on their
tax refunds to pay bills for necessary
expenses might be unduly burdened by
such a delay. Additionally, when
Congress amended section 6402 to
prevent the IRS from issuing some
refunds before February 15, it did not
use a later date or delay refunds to all
taxpayers, thus indicating a sensitivity
to the negative effect that further
delaying taxpayer refunds could have
on certain taxpayers.
Regarding the comment that issuing
an IP PIN to each known taxpayer
would reduce fraud and identity theft
and eliminate the need to accelerate
receipt of certain information returns,
the Treasury Department and the IRS
disagree. While the IP PIN has been an
effective tool for protecting taxpayers
from subsequent refund fraud, it is not
a holistic or sustainable solution that
can be applied to the more than 150
million returns that are filed annually
each year. See TIGTA report 2017–40–
026, ‘‘Inconsistent Processes and
Procedures Result in Many Victims of
Identity Theft Not Receiving Identity
Protection Personal Identification
Numbers,’’ 20–22. Additionally, even if
the IRS implemented such a proposal,
the IRS’s efforts to reduce fraud and
identity theft would be further
enhanced by also accelerating receipt of
information returns, such as Form W–2
and forms reporting nonemployee
compensation. Accordingly, this
suggestion has not been adopted.
Comments also suggested that the IRS
extend the filing deadline for individual
income tax returns to May 15, rather
than limiting the availability of an
automatic extension of time to file
information returns. Taxpayers may
already request an automatic six-month
extension of time to file individual
income tax returns under § 1.6081–4,
effectively extending the filing deadline
(but not the deadline by which to pay)
as suggested by the comment. However,
even if the IRS extended the filing
deadline to May 15 for all individual
taxpayers, that would do little to
prevent fraud because fraudulent filers
typically file early in the filing season
so that their fraudulent returns are
processed before legitimate taxpayers
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file their tax returns and before the IRS
receives information returns.
II. Comments Recommending Retention
of the Automatic Extension of Time To
File Information Returns With Low
Risk of Fraud
Comments suggested that the
regulations retain the automatic
extension of time to file forms other
than Form W–2 and forms reporting
nonemployee compensation, because
the other forms, specifically Form 1099–
INT, Form 1099–DIV, Form 1042–S, and
the Form 1095 series, are not major
sources of withholding or backup
withholding information and are not
relevant to preventing fraud. The
comments cited GAO Report GAO–14–
633, ‘‘Identity Theft, Additional Actions
Could Help IRS Combat the Large,
Evolving Threat of Refund Fraud,’’ for
the assertion that information return
documents other than Form W–2 do not
have a nexus to fraud. The comments
also stated that Form 1042–S is not as
susceptible to fraud because Form
1040–NR, ‘‘U.S. Nonresident Alien
Income Tax Return,’’ and Form 1120–F,
‘‘U.S. Income Tax Return of a Foreign
Corporation,’’ are already subject to an
extensive review by the IRS.
In contrast, one comment stated that
the burden on filers of removing the
automatic extension of time to file was
a worthwhile tradeoff, given the
financial burdens on taxpayers whose
refunds are stolen. This comment
suggested that filers should be able to
verify many of their records prior to the
end of the tax year, and that it was their
responsibility to maintain accurate
records.
The Treasury Department and the IRS
agree that accelerating the filing date for
information returns reporting
compensation will contribute more to
the reduction of refund fraud than
accelerating the filing date of other
information returns would. This is
because refund fraud is most prevalent
on individual income tax returns
reporting wages or self-employment
income. Consistent with this, Congress
enacted section 201 of the PATH Act as
part of its program integrity measures
included in the Consolidated
Appropriations Act of 2016 to accelerate
the date by which Form W–2 and
statements reporting nonemployee
compensation, but not other information
returns, must be filed. In addition,
§ 31.6071(a)-1T(a)(3) provides that the
due date implemented by the PATH Act
for Form W–2 applies to the entire Form
W–2 series (except Form W–2G).
Therefore, the comment is adopted, and
the final regulations only remove the
automatic extension of time to file the
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Form W–2 series (except Form W–2G)
and forms reporting nonemployee
compensation (currently Form 1099–
MISC with information in box 7). The
IRS continues to study the
appropriateness of the automatic
extension for other information returns.
III. Comments Regarding Increased
Errors as a Result of Removal of the
Automatic Extension of Time To File
Comments stated that removing the
automatic extension of time to file
would compress the time between the
date the payee statements are sent and
the information returns are required to
be filed with the IRS. This is
particularly true in the case of Form
1099–B, ‘‘Proceeds from Broker and
Barter Exchange Transactions,’’ and
Form 1099–MISC with information in
boxes 8 or 14 only (relating to substitute
dividends and tax-exempt interest
payments reportable by brokers and
gross proceeds paid to attorneys),
because the due date to furnish
statements to payees for those forms is
February 15. Without the automatic
extension, there is less time before the
filing due date for recipients of the
payee statements to discover errors and
communicate them to the filer, resulting
in more errors on filed information
returns and the need to file more
corrected information returns.
Comments also stated that this
compression is made more acute
because the system for filing
information returns electronically
(FIRE) requires files be in a format
different from the format many filers use
to prepare the payee statements.
Without the automatic extension of time
to file there will be less time to
accommodate these differences, which
could lead to an increase in errors and
the need to file corrected information
returns.
The comments also stated that filers’
necessary year-end audit practices with
respect to information that is ultimately
reported on information returns are
time-consuming, and the automatic
extension of time to file increases the
accuracy of filed returns. Finally, the
comments stated that removing the
automatic extension further compresses
the filing season, burdening accounting
professionals who already work 60 to 80
hours per week in the months leading
up to the filing deadlines.
One comment supported the proposed
regulations generally, but opposed the
removal of the automatic extension of
time to file the Form 1099 series. The
comment stated that the pressure to
meet a rigid deadline would lead to
more errors for small businesses without
full-time bookkeepers and would have a
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financial impact on those businesses.
Small startups would be
disproportionately affected because they
are more likely to use independent
contractors, for which they have to file
information returns in the Form 1099
series. The comment requested that the
IRS conduct a regulatory flexibility
analysis and make it available for public
comment if these final regulations
remove the automatic extension of time
to file the Form 1099 series.
The comments supporting retention of
the automatic extension of time to file
most information returns are adopted in
the final regulations. However, as
discussed above in section II of this
Summary of Comments, acceleration of
the IRS’s receipt of information relating
to compensation is an important tool to
reduce fraud and noncompliance.
Further, the removal of the automatic
extension of time to file the Form
W–2 series (except Form W–2G) and
forms reporting nonemployee
compensation is consistent with section
201 of the PATH Act and its supporting
regulations under § 31.6071(a)–1T(a)(3),
which together accelerated the filing
deadline for both the Form W–2 series
(except Form W–2G) and forms
reporting nonemployee compensation.
Accordingly, the final regulations
remove the automatic extension of time
to file the Form W–2 series (except
Form W–2G) and forms reporting
nonemployee compensation.
With regard to the request for a
regulatory flexibility analysis in the case
of the removal of the automatic
extension of time to file the Form 1099
series, the only affected forms are forms
reporting nonemployee compensation.
As certified in the Special Analyses
section of this Treasury Decision, the
Treasury Department and the IRS have
concluded that these regulations will
not have a significant economic impact
on a substantial number of small
entities. As a result of this certification,
a regulatory flexibility analysis is not
required.
With regard to Form 1094–C and the
Form 1095 series, the comments stated
that preserving the automatic extension
of time to file would allow health
insurers to maintain their current
processes. The Treasury Department
and the IRS agree with these comments
and, therefore, the final regulations
retain the automatic extension of time to
file Form 1094–C, Form 1095–B, and
Form 1095–C.
IV. Comments About Forms W–2 and
Reliance on Information or Actions by
Third Parties
Comments stated various reasons why
the automatic 30-day extension of time
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to file Form W–2 should be retained.
Comments stated that to prepare Form
W–2, filers rely on third-party payment
information from states on sickness and
disability payments that is not due to
the filers until January 15, and filers
have no control over the timeliness and
accuracy of this third-party information.
The comments also stated that Form
W–2 filers rely on third-party
information that they receive after the
end of the tax year for nonqualified
moving expenses, prizes and awards,
the value of company housing and
travel, and non-cash fringe benefits.
As discussed under section II and
reiterated under section III of this
Summary of Comments, removal of the
automatic extension of time to file the
Form W–2 series (except Form W–2G)
will contribute to the reduction of
refund fraud and is consistent with
section 201 of the PATH Act and its
supporting regulations. The Treasury
Department and the IRS understand that
there may be some situations that will
necessitate filers to seek a nonautomatic extension of time to file; for
instance, when a filer does not timely
receive the statement of sick pay
required under § 31.6051–3(a)(1).
Removal of the automatic extension,
however, will increase the number of
Forms W–2 received by the IRS early
enough in the filing season for the IRS
to verify information and reduce
payment of fraudulent refunds.
V. Comments on Form 1042–S,
Reclassification of Distributions, and
Additional Burdens
Comments stated that corrections are
sometimes necessary after the statutory
deadlines to file certain returns, such as
Form 1042–S, because of
reclassifications of distributions.
Information regarding these
reclassifications is not available until
sometime between mid-January and the
end of February. If Forms 1042–S must
be filed without the benefit of an
automatic extension of time to file, then
it is more likely that they will have to
be amended later based on the
reclassification information. Comments
added that software vendors typically
release their software in late February
for Form 1042–S, and that there is not
enough time to format information and
test the software prior to the March 15
statutory due date. Comments also
mentioned that filers regularly seek
extensions of time to furnish recipient
statements for Form 1042–S in addition
to extensions of time to file, and the
comments advised that the IRS should
expect an increase in the filing of both
amended information returns and
amended income tax returns as a result
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of the unavailability of the automatic
extension, particularly for Form 1042–S.
Comments further added that updates to
the Form 1099 series resulting from the
Foreign Account Tax Compliance Act,
Public Law 111–147, Title V, Subtitle A
(124 Stat. 71, 97), and sections 6050W
and 6045B require year-end system
upgrades and testing, which must be
performed by the same people who
otherwise implement the year-end
compliance processes and therefore
increase, rather than decrease, the time
needed to file. Finally, the comments
mentioned that information that flows
from partnership returns or upstream
withholding agents is not available until
March 15.
As discussed previously under
section II of this Summary of
Comments, these final regulations do
not remove the automatic extension of
time to file information returns other
than the Form W–2 series (except Form
W–2G) and forms reporting
nonemployee compensation. Therefore,
the comment that Form 1042–S should
remain eligible for the automatic
extension of time to file has been
adopted. However, the IRS continues to
study the appropriateness of the
automatic extension of time to file Form
1042–S.
VI. Comments on Penalties
One comment suggested that, given
filers’ potential inability to comply with
the statutory filing dates, filers should
have reassurances that the IRS will grant
the non-automatic extension of time to
file so that they do not face penalties.
The comment therefore requested that
specific criteria for granting the nonautomatic extension should be
published in the final regulation. The
comment also stated that the proposed
requirement to show extraordinary
circumstances or catastrophe is too
strict a standard to impose on the
extension process. The comment further
stated that penalties would be
unreasonable where a request for an
extension of time to file was not
granted, and the process of seeking
relief if penalties were imposed in these
situations would be arduous. In
addition, the comment stated that
despite the new $100 de minimis error
threshold exception for penalties, there
would still be a substantial number of
errors that would exceed the de minimis
threshold and require correction. Also,
comments noted that the increase in
errors in information returns filed with
the IRS as a result of not obtaining an
extension of time to file might lead to
more penalty notices, which would
increase the burden on filers seeking
relief under reasonable cause. This
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38027
increase in penalty notices would also
increase the burden on the IRS, which
would have to handle many more
requests for abatements or waivers of
the penalty.
The Treasury Department and the IRS
considered these comments and agree
that it is appropriate to set forth the
specific criteria under which the IRS
will grant the non-automatic extension
of time to file. Since publication of the
temporary and proposed regulations in
2015, Form 8809 has been revised to
provide specificity around the criteria
for when a non-automatic extension will
be granted. When Form 8809 allowed
the filer or transmitter to provide a
narrative explanation of the need for an
extension, it was difficult to review the
explanations in a timely manner
because of the length of some of the
explanations and the various ways that
filers or transmitters would describe the
reason for the extension request. To
eliminate this issue, the form has been
revised to provide checkboxes for the
filer or transmitter to indicate the reason
for the extension request.
The IRS intends to update Form 8809
in time for the 2019 filing season to
provide that a non-automatic extension
of time to file will be granted if and only
if (1) the business suffered a
catastrophic event in a Federally
Declared Disaster Area that made the
business unable to resume operations or
made necessary records unavailable; (2)
fire, casualty or natural disaster affected
the operation of the business; (3) death,
serious illness, or unavoidable absence
of the individual responsible for filing
the information returns affected the
operation of the business; (4) the
information return is being filed for the
first year the business was established;
or (5) the filer did not receive timely
data on a third-party payee statement.
This third-party payee statement might
be a Schedule K–1, ‘‘Partner’s Share of
Current Year Income, Deductions,
Credits and Other Items,’’ Form 1042–S,
or the statement of sick pay required
under § 31.6051–3(a)(1). Additionally,
the extension will be granted even if the
filer receives the third-party payee
statement by the statutory furnishing
deadline, provided that the filer did not
receive the statement in time to prepare
an accurate information return.
These five criteria will all be set forth
in checkboxes on Form 8809. The first
four of these criteria are already present
on the form, with non-substantive
differences in phrasing, and were
derived from the reasons for which the
IRS would grant a non-automatic
extension of time to file during recent
years when a narrative explanation was
permitted. The fifth criteria will be
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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations
added to Form 8809 in response to
comments about reliance on third-party
information. The Treasury Department
and the IRS request comments on these
criteria and welcome comments
suggesting additional criteria that
should be added to Form 8809 as
reasons to grant the non-automatic
extension. Interested parties can address
the existing criteria and suggest new
criteria by submitting comments on
Form 8809 at https://www.irs.gov/
FormsComments.
Also, with regard to the comments
about the potential increase in errors
and penalty notices, penalty abatement
may be available for filers who fail to
file timely but do not receive an
extension of time to file. Although
requests for abatement may increase
under the new rules, the IRS is prepared
to consider those additional requests.
The Treasury Department and the IRS
request comments regarding how the
IRS may reduce the burden on filers
who request abatement.
Special Analyses
These regulations are not subject to
review under section 6(b) of Executive
Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Treasury Department
and the Office of Management and
Budget regarding review of tax
regulations.
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby
certified that these regulations will not
have a significant economic impact on
a substantial number of small entities.
Although the regulations may
potentially affect a substantial number
of small entities, the economic impact
on these entities is not expected to be
significant. If at least one of the criteria
for granting an extension applies, a
business may obtain a 30-day extension
of time to file by properly completing
Form 8809, so many businesses will still
obtain an extension of time to file. Prior
versions of § 1.6081–8 also required
businesses to file Form 8809 to obtain
an extension, so no additional economic
impact is associated with the
requirement to file this form. For
businesses that do not qualify for the
extension, the regulations do not impose
new information reporting
requirements, but they do affect whether
the filing due date may be extended.
Although there may be some additional
costs associated with ensuring that
information returns filed by their
statutory due date, as opposed to the
extended due date, are accurate, those
costs will not impose a significant
economic impact on a substantial
number of small entities.
In addition, statutory changes have
minimized the benefit of the automatic
extension of time to file. Prior to these
changes, most filers had a due date
(without regard to extensions) of March
31 for the information returns currently
subject to the rule eliminating the
automatic extension of time to file—the
Form W–2 series (except Form W–2G)
and Form 1099–MISC reporting
nonemployee compensation. With the
automatic extension, these filers
generally had until April 30 to file these
information returns. The PATH Act and
the accompanying regulations
accelerated the due date for the Form
W–2 series (except Form W–2G) and
Form 1099–MISC reporting
nonemployee compensation from March
31 to January 31. Therefore, even if the
automatic extension was still available,
the Form W–2 series (except Form W–
2G) and Form 1099–MISC reporting
nonemployee compensation would be
due much earlier than under prior law,
so the statutory change under the PATH
Act is the primary cause of any
additional cost associated with having
to file these forms earlier in the filing
season. Pursuant to section 7805(f) of
the Code, the notice of proposed
rulemaking preceding these regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business. No comments
were received from the Small Business
Administration.
Drafting Information
The principal author of these
regulations is Jonathan R. Black of the
Office of the Associate Chief Counsel
(Procedure and Administration).
Statement of Availability of IRS
Documents
The IRS Revenue Procedure cited in
this document is published in the
Internal Revenue Bulletin (or
Cumulative Bulletin) and is available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6081–8 is revised to
read as follows:
■
§ 1.6081–8 Extension of time to file certain
information returns.
(a) Certain information returns
eligible for an automatic extension of
time to file—(1) Automatic extension of
time to file. A person required to file an
information return (the filer) on the
forms or form series listed in Table 1
will be allowed one automatic 30-day
extension of time to file the information
return beyond the due date for filing, if
the filer or the person transmitting the
information return for the filer (the
transmitter) files an application in
accordance with paragraph (c)(1) of this
section.
TABLE 1 TO PARAGRAPH (a)(1)
Name of form
Form W–2G ........................................................................
Form 1042–S .....................................................................
Form 1094-C ......................................................................
amozie on DSK3GDR082PROD with RULES
Form or form series
‘‘Certain Gambling Winnings’’.
‘‘Foreign Person’s U.S. Source Income Subject to Withholding’’.
‘‘Transmittal of Employer-Provided Health Insurance Offer and Coverage Information
Returns’’.
‘‘Health Coverage’’.
‘‘Employer-Provided Health Insurance Offer and Coverage’’.
‘‘Exercise of an Incentive Stock Option Under Section 422(b)’’.
‘‘Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)’’.
‘‘Employer’s Annual Information Return of Tip Income and Allocated Tips’’.
Form
Form
Form
Form
1095–B .....................................................................
1095–C .....................................................................
3921 ..........................................................................
3922 ..........................................................................
Form 8027 ..........................................................................
Form 1097 series.
Form 1098 series.
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Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Rules and Regulations
38029
TABLE 1 TO PARAGRAPH (a)(1)—Continued
Form or form series
Name of form
amozie on DSK3GDR082PROD with RULES
Form 1099 series (except forms reporting nonemployee
compensation).
Form 5498 series.
(2) Non-automatic extension of time
to file. One additional 30-day extension
of time to file an information return on
a form listed in paragraph (a)(1) of this
section may be allowed if the filer or
transmitter submits a request for the
additional extension of time to file
before the expiration of the automatic
30-day extension of time to file. No
extension of time to file will be granted
under this paragraph (a)(2) unless the
filer or transmitter has first obtained an
automatic extension of time to file
under paragraph (a)(1) of this section.
To request the additional 30-day
extension of time to file, the filer or
transmitter must satisfy the
requirements of paragraph (c)(2) of this
section. No additional extension of time
to file will be allowed for an
information return on a form listed in
paragraph (a)(1) of this section under
§ 1.6081–1 beyond the extensions of
time to file provided by paragraph (a)(1)
of this section and this paragraph (a)(2).
(b) The Form W–2 series (except Form
W–2G) or forms reporting nonemployee
compensation. Except as provided in
paragraph (f) of this section, the filer or
transmitter of an information return on
the Form W–2 series (except Form W–
2G) or a form reporting nonemployee
compensation may only request one
non-automatic 30-day extension of time
to file the information return beyond the
due date for filing it. To make such a
request, the filer or transmitter must
submit an application for an extension
of time to file in accordance with
paragraph (c)(2) of this section. No
additional extension of time to file will
be allowed for an information return on
a form listed in this paragraph (b) under
§ 1.6081–1 beyond the 30-day extension
of time to file provided by this
paragraph (b).
(c) Requirements—(1) Automatic
extension of time to file. To satisfy this
paragraph (c)(1), an application must—
(i) Be submitted on Form 8809,
‘‘Request for Extension of Time to File
Information Returns,’’ or in any other
manner as may be prescribed by the
Commissioner; and
(ii) Be filed with the Internal Revenue
Service office designated in the
application’s instructions on or before
the due date for filing the information
return.
VerDate Sep<11>2014
23:08 Aug 02, 2018
Jkt 244001
(2) Non-automatic extension of time
to file. To satisfy this paragraph (c)(2),
a filer or transmitter must—
(i) Submit a complete application on
Form 8809, or in any other manner
prescribed by the Commissioner,
indicating that at least one of the criteria
set forth in the forms, instructions, or
other guidance for granting an extension
applies;
(ii) File the application with the
Internal Revenue Service in accordance
with forms, instructions, or other
appropriate guidance on or before the
due date for filing the information
return (for purposes of paragraph (a)(2)
of this section, determined with regard
to the extension of time to file under
paragraph (a)(1) of this section); and
(iii) Sign the application under
penalties of perjury.
(d) Penalties. See sections 6652, 6693,
and 6721 through 6724 of the Code for
failure to comply with information
reporting requirements on information
returns described in this section.
(e) No effect on time to furnish
statements. An extension of time to file
an information return under this section
does not extend the time for furnishing
a statement to the person with respect
to whom the information is required to
be reported.
(f) Form W–2 filed on expedited basis.
This section does not apply to an
information return on a form in the W–
2 series if the procedures authorized in
Rev. Proc. 96–57 (1996–2 CB 389) (or a
successor revenue procedure) allow an
automatic extension of time to file the
information return. See
§ 601.601(d)(2)(ii)(b) of this chapter.
(g) Applicability date. This section
applies to requests for extensions of
time to file information returns required
to be filed after December 31, 2018.
Section 1.6081–8T (as contained in 26
CFR part 1, revised April 1, 2018)
applies to extensions of time to file
information returns required to be filed
before January 1, 2019.
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§ 1.6081–8T
■
[Removed]
Par. 3. Section 1.6081–8T is removed.
Kirsten Wielobob,
Deputy Commissioner for Services and
Enforcement.
Approved: July 13, 2018.
David J. Kautter,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2018–16717 Filed 8–1–18; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket Number USCG–2018–0027]
RIN 1625–AA11
Regulated Navigation Area; Lake
Washington, Seattle, WA
Coast Guard, DHS.
Temporary final rule.
AGENCY:
ACTION:
The Coast Guard is
establishing a temporary regulated
navigation area for certain navigable
waters of Lake Washington. The
regulated navigation area is intended to
protect personnel and vessels moored in
the vicinity and other vessel traffic from
potential hazards created by vessel
wake. Vessels transiting this area will be
restricted to speeds that create a
minimum wake.
DATES: This rule is effective from 8 p.m.
on August 3, 2018, through 11:59 p.m.
on August 5, 2018. This rule will be
enforced from 8 p.m. to 8 a.m. daily
from August 3, 2018, through August 4,
2018 and from 8 p.m. to 11:59 p.m. on
August 5, 2018.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type USCG–2018–
0027 in the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
rule.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email Petty Officer Zachary Spence,
SUMMARY:
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]]>Agencies
[Federal Register Volume 83, Number 150 (Friday, August 3, 2018)]
[Rules and Regulations]
[Pages 38023-38029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16717]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9838]
RIN 1545-BM49
Extension of Time To File Certain Information Returns
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations providing rules
regarding the automatic and non-automatic extension of time to file
certain information returns. These changes are being implemented to
accelerate the filing of the Form W-2 series (except Form W-2G) and
forms that report nonemployee compensation (currently Form 1099-MISC
with information in box 7) so they are available earlier in the filing
season for use in the IRS's identity
[[Page 38024]]
theft and refund fraud detection processes. In addition, these final
regulations update the list of information returns subject to the rules
regarding extensions of time to file. These regulations affect filers
requesting an extension of time to file the affected information
returns.
DATES: Effective date: These regulations are effective on August 3,
2018.
Applicability date: For dates of applicability, see Sec. 1.6081-
8(g).
FOR FURTHER INFORMATION CONTACT: Jonathan R. Black, (202) 317-6845 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 1 under section
6081 of the Internal Revenue Code (Code) regarding the extension of
time to file certain information returns. On August 13, 2015, the IRS
published in the Federal Register temporary regulations (TD 9730 (80 FR
48433)) under Sec. 1.6081-8T removing the automatic 30-day extension
of time to file the Form W-2 series (except Form W-2G, ``Certain
Gambling Winnings'') and providing a single non-automatic 30-day
extension of time to file these forms. The temporary regulations also
updated the list of information returns eligible for an extension of
time to file. The temporary regulations were applicable for requests
for extension of time to file information returns due after December
31, 2016. The temporary regulations were set to expire August 10, 2018,
but they are removed by this Treasury Decision.
A notice of proposed rulemaking (REG-132075-14 (80 FR 48472))
cross-referencing the temporary regulations was published in the
Federal Register the same day the temporary regulations were published.
The notice of proposed rulemaking contains proposed regulations that
would remove the automatic 30-day extension of time to file all
information returns subject to the rules formerly under Sec. 1.6081-8
and provide a single non-automatic 30-day extension of time to file
those information returns. The IRS received comments on the notice of
proposed rulemaking, but no public hearing was requested or held. After
consideration of the comments, this Treasury Decision adopts the
proposed regulations only with respect to the removal of the automatic
extension of time to file the Form W-2 series (except Form W-2G) and
forms reporting nonemployee compensation (currently Form 1099-MISC,
``Miscellaneous Income,'' with information in box 7). The automatic
extension of time to file is retained for Form W-2G, Form 1042-S,
``Foreign Person's U.S. 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),'' and Form 8027, ``Employer's
Annual Information Return of Tip Income and Allocated Tips,'' the Form
1097 series, Form 1098 series, Form 1099 series (except forms reporting
nonemployee compensation), and Form 5498 series.
I. Extension of Time To File Information Returns
Section 6081(a) generally provides that the Secretary may grant a
reasonable extension of time, not to exceed 6 months, for filing any
return, declaration, statement, or other document required by Title 26
or by regulation. The regulations under section 6081 generally provide
rules for extensions of time to file returns. The regulations under
Sec. 1.6081-8 provide specific rules for extensions of time to file
certain information returns.
For requests for extension of time to file information returns due
before January 1, 2017, Sec. 1.6081-8 provided that a person required
to file certain information returns (the filer), or the person
transmitting the return for the filer (the transmitter), could request
an automatic 30-day extension of time to file those information returns
by filing a Form 8809, ``Application for Extension of Time to File
Information Returns'' on or before the due date of the information
return. A filer or transmitter was not required to sign the Form 8809
or provide an explanation to request the automatic 30-day extension.
Prior to expiration of the automatic 30-day extension period, a
filer or transmitter that obtained an automatic 30-day extension of
time to file could request an additional non-automatic 30-day extension
of time to file. Under Sec. 1.6081-8, the IRS had the discretion to
grant this request if the IRS determined that a further extension was
warranted. Unlike a request to obtain an automatic extension, a request
for a non-automatic extension was required to be signed by the filer or
transmitter under penalties of perjury and include an explanation of
why an additional extension of time to file was needed. No further
extensions of time to file were permitted under Sec. 1.6081-8.
II. Temporary and Proposed Regulations
Identity theft and refund fraud are persistent and evolving threats
to the nation's tax system. They place an enormous burden on the tax
system and taxpayers. Identity thieves and unscrupulous preparers often
claim refunds by electronically filing fraudulent tax returns early in
the tax filing season. The IRS uses third-party information returns to
increase voluntary compliance, verify accuracy of tax returns, improve
collection of taxes, and combat fraud, including refund fraud committed
by those using the stolen identities of legitimate taxpayers.
Accelerating the receipt of third-party information returns is one way
to better enable the IRS to identify and stop fraudulent refund claims
before they are paid.
On August 13, 2015, temporary and proposed regulations under
section 6081 were published in the Federal Register to improve the
IRS's ability to use third-party information returns to combat identity
theft and refund fraud. The temporary regulation under Sec. 1.6081-8T,
which replaced the regulation under Sec. 1.6081-8 for requests for
extension of time to file certain information returns due after
December 31, 2016, removed information returns in the Form W-2 series
(except Form W-2G) from the list of information returns eligible for
the automatic 30-day extension of time to file and instead provided a
single non-automatic 30-day extension of time to file those information
returns.
Section 1.6081-8T(a) retained the rules under Sec. 1.6081-8 for
obtaining an automatic 30-day extension of time to file Form W-2G, Form
1042-S, Form 1095-B, Form 1095-C, Form 8027, the Form 1097 series, Form
1098 series, Form 1099 series, and Form 5498 series. It also retained
the additional non-automatic 30-day extension of time to file these
information returns.
In addition, the temporary regulations updated the list of
information returns that are eligible for automatic and non-automatic
extensions of time to file by adding Form 1094-C, Form 3921, and Form
3922 to the list in Sec. 1.6081-8T(a). As explained in the preamble to
the temporary regulations, the addition of these forms merely updated
the list to reflect current practice at the time the temporary
regulations were published.
The proposed regulations were broader than the temporary
regulations. The notice of proposed rulemaking proposed to remove the
automatic
[[Page 38025]]
extension of time to file Forms 1042-S, 1094-C, 1095-B, 1095-C, 3921,
3922, and 8027; to remove the automatic extension of time to file the
Form W-2 series (including Form W-2G), Form 1097 series, Form 1098
series, Form 1099 series, and Form 5498 series; and to allow only a
single non-automatic 30-day extension of time to file all of these
information returns. The proposed non-automatic extension would have
been available on the same terms as the non-automatic extension for the
Form W-2 series in the temporary regulations. The preamble to the
proposed regulations provided that removal of the automatic extension
would not apply to information returns (other than the Form W-2 series
except Form W-2G) due any earlier than January 1, 2018. See 80 FR
48472.
III. Statutory Changes to Due Dates and Penalties
Section 201 of the Protecting Americans from Tax Hikes Act of 2015
(PATH Act), Public Law 114-113, Div. Q (129 Stat. 3040, 3076), enacted
on December 18, 2015, amended section 6071 of the Code to change the
due date for filing Form W-2, ``Wage and Tax Statement,'' and any
returns or statements required by the Secretary to report nonemployee
compensation. Nonemployee compensation is currently reportable in box 7
of Form 1099-MISC. The amendments are effective for information returns
for calendar years beginning after 2015.
Prior to enactment of the PATH Act, the Form W-2 was required to be
filed by the last day of February (February 28 if amounts were not
subject to the Federal Insurance Contribution Act), or March 31 if
filed electronically. See Sec. 1.6041-2(a)(3)(ii) and Sec.
31.6071(a)-1(a)(3)(i) (as in effect until July 20, 2017). Also prior to
the enactment of the PATH Act, the form reporting nonemployee
compensation, Form 1099-MISC, was required to be filed by February 28,
or March 31 if filed electronically. See Sec. 1.6041-6 (as in effect
until July 20, 2017).
As amended by the PATH Act, section 6071 provides that the due date
for filing the Form W-2 and any returns or statements required by the
Secretary to report nonemployee compensation is January 31 of the
calendar year following the calendar year for which the information is
being reported, regardless of whether these information returns are
filed on paper or electronically. Section 31.6071(a)-1T(a)(3) provides
this due date for the entire Form W-2 series (except Form W-2G). The
due date for filing Form 1099-MISC that does not report nonemployee
compensation was unchanged by the PATH Act amendment to section 6071,
and it remains February 28, or March 31 if filed electronically.
Section 201 of the PATH Act also amended section 6402 to provide
that no credit or refund of an overpayment may be made to a taxpayer
before the fifteenth day of the second month following the close of the
taxable year (February 15 for calendar year taxpayers) if the
Additional Child Tax Credit (ACTC) under section 24(d) or the Earned
Income Credit (EIC) under section 32 is allowed for such taxable year.
In addition, section 202 of the PATH Act amended sections 6721 and
6722 of the Code to generally provide a $100 de minimis error threshold
($25 for withholding) under which the penalties for failure to file and
failure to furnish accurate information returns and payee statements do
not apply. Payees, however, can still elect to receive accurate payee
statements, in which case the de minimis threshold does not apply to
the penalties for failure to file and furnish. See section
6722(c)(3)(B).
Summary of Comments
There were eleven written comments submitted in response to the
notice of proposed rulemaking. They are available at https://www.regulations.gov or upon request.
I. Comments Recommending Alternatives To Removing the Automatic
Extension of Time To File Information Returns
Comments stated that the automatic extension of time to file should
not be removed for any information returns and instead alternative or
complementary steps to reduce fraud should be taken. Those suggested
steps include: (1) Delay the start of the filing season or issue
refunds only after the Social Security Administration (SSA) has
transferred all Form W-2 information to the IRS; (2) require electronic
filing of all information returns at issue; (3) reduce the threshold
requirement for filing information returns electronically from 250
returns to five returns; and (4) issue an identity protection personal
identification number (IP PIN) to each known taxpayer.
Some of these steps have already been taken. For instance, the PATH
Act amended section 6402 so that refunds cannot be issued before
February 15 if the EIC or the ACTC is allowed for the taxable year.
This amendment has the effect of allowing the IRS to receive more Form
W-2 information with respect to these returns before issuing refunds.
Other steps, such as requiring electronic filing of all information
returns or reducing the electronic filing threshold, require
legislation to implement.
Comments suggesting that the IRS delay the start of the filing
season (without regard to the February 15 date if the EIC or the ACTC
is allowed) or issue refunds only after receiving Form W-2 information
from the SSA were not adopted. Taxpayers who rely on their tax refunds
to pay bills for necessary expenses might be unduly burdened by such a
delay. Additionally, when Congress amended section 6402 to prevent the
IRS from issuing some refunds before February 15, it did not use a
later date or delay refunds to all taxpayers, thus indicating a
sensitivity to the negative effect that further delaying taxpayer
refunds could have on certain taxpayers.
Regarding the comment that issuing an IP PIN to each known taxpayer
would reduce fraud and identity theft and eliminate the need to
accelerate receipt of certain information returns, the Treasury
Department and the IRS disagree. While the IP PIN has been an effective
tool for protecting taxpayers from subsequent refund fraud, it is not a
holistic or sustainable solution that can be applied to the more than
150 million returns that are filed annually each year. See TIGTA report
2017-40-026, ``Inconsistent Processes and Procedures Result in Many
Victims of Identity Theft Not Receiving Identity Protection Personal
Identification Numbers,'' 20-22. Additionally, even if the IRS
implemented such a proposal, the IRS's efforts to reduce fraud and
identity theft would be further enhanced by also accelerating receipt
of information returns, such as Form W-2 and forms reporting
nonemployee compensation. Accordingly, this suggestion has not been
adopted.
Comments also suggested that the IRS extend the filing deadline for
individual income tax returns to May 15, rather than limiting the
availability of an automatic extension of time to file information
returns. Taxpayers may already request an automatic six-month extension
of time to file individual income tax returns under Sec. 1.6081-4,
effectively extending the filing deadline (but not the deadline by
which to pay) as suggested by the comment. However, even if the IRS
extended the filing deadline to May 15 for all individual taxpayers,
that would do little to prevent fraud because fraudulent filers
typically file early in the filing season so that their fraudulent
returns are processed before legitimate taxpayers
[[Page 38026]]
file their tax returns and before the IRS receives information returns.
II. Comments Recommending Retention of the Automatic Extension of Time
To File Information Returns With Low Risk of Fraud
Comments suggested that the regulations retain the automatic
extension of time to file forms other than Form W-2 and forms reporting
nonemployee compensation, because the other forms, specifically Form
1099-INT, Form 1099-DIV, Form 1042-S, and the Form 1095 series, are not
major sources of withholding or backup withholding information and are
not relevant to preventing fraud. The comments cited GAO Report GAO-14-
633, ``Identity Theft, Additional Actions Could Help IRS Combat the
Large, Evolving Threat of Refund Fraud,'' for the assertion that
information return documents other than Form W-2 do not have a nexus to
fraud. The comments also stated that Form 1042-S is not as susceptible
to fraud because Form 1040-NR, ``U.S. Nonresident Alien Income Tax
Return,'' and Form 1120-F, ``U.S. Income Tax Return of a Foreign
Corporation,'' are already subject to an extensive review by the IRS.
In contrast, one comment stated that the burden on filers of
removing the automatic extension of time to file was a worthwhile
tradeoff, given the financial burdens on taxpayers whose refunds are
stolen. This comment suggested that filers should be able to verify
many of their records prior to the end of the tax year, and that it was
their responsibility to maintain accurate records.
The Treasury Department and the IRS agree that accelerating the
filing date for information returns reporting compensation will
contribute more to the reduction of refund fraud than accelerating the
filing date of other information returns would. This is because refund
fraud is most prevalent on individual income tax returns reporting
wages or self-employment income. Consistent with this, Congress enacted
section 201 of the PATH Act as part of its program integrity measures
included in the Consolidated Appropriations Act of 2016 to accelerate
the date by which Form W-2 and statements reporting nonemployee
compensation, but not other information returns, must be filed. In
addition, Sec. 31.6071(a)-1T(a)(3) provides that the due date
implemented by the PATH Act for Form W-2 applies to the entire Form W-2
series (except Form W-2G). Therefore, the comment is adopted, and the
final regulations only remove the automatic extension of time to file
the Form W-2 series (except Form W-2G) and forms reporting nonemployee
compensation (currently Form 1099-MISC with information in box 7). The
IRS continues to study the appropriateness of the automatic extension
for other information returns.
III. Comments Regarding Increased Errors as a Result of Removal of the
Automatic Extension of Time To File
Comments stated that removing the automatic extension of time to
file would compress the time between the date the payee statements are
sent and the information returns are required to be filed with the IRS.
This is particularly true in the case of Form 1099-B, ``Proceeds from
Broker and Barter Exchange Transactions,'' and Form 1099-MISC with
information in boxes 8 or 14 only (relating to substitute dividends and
tax-exempt interest payments reportable by brokers and gross proceeds
paid to attorneys), because the due date to furnish statements to
payees for those forms is February 15. Without the automatic extension,
there is less time before the filing due date for recipients of the
payee statements to discover errors and communicate them to the filer,
resulting in more errors on filed information returns and the need to
file more corrected information returns.
Comments also stated that this compression is made more acute
because the system for filing information returns electronically (FIRE)
requires files be in a format different from the format many filers use
to prepare the payee statements. Without the automatic extension of
time to file there will be less time to accommodate these differences,
which could lead to an increase in errors and the need to file
corrected information returns.
The comments also stated that filers' necessary year-end audit
practices with respect to information that is ultimately reported on
information returns are time-consuming, and the automatic extension of
time to file increases the accuracy of filed returns. Finally, the
comments stated that removing the automatic extension further
compresses the filing season, burdening accounting professionals who
already work 60 to 80 hours per week in the months leading up to the
filing deadlines.
One comment supported the proposed regulations generally, but
opposed the removal of the automatic extension of time to file the Form
1099 series. The comment stated that the pressure to meet a rigid
deadline would lead to more errors for small businesses without full-
time bookkeepers and would have a financial impact on those businesses.
Small startups would be disproportionately affected because they are
more likely to use independent contractors, for which they have to file
information returns in the Form 1099 series. The comment requested that
the IRS conduct a regulatory flexibility analysis and make it available
for public comment if these final regulations remove the automatic
extension of time to file the Form 1099 series.
The comments supporting retention of the automatic extension of
time to file most information returns are adopted in the final
regulations. However, as discussed above in section II of this Summary
of Comments, acceleration of the IRS's receipt of information relating
to compensation is an important tool to reduce fraud and noncompliance.
Further, the removal of the automatic extension of time to file the
Form W-2 series (except Form W-2G) and forms reporting nonemployee
compensation is consistent with section 201 of the PATH Act and its
supporting regulations under Sec. 31.6071(a)-1T(a)(3), which together
accelerated the filing deadline for both the Form W-2 series (except
Form W-2G) and forms reporting nonemployee compensation. Accordingly,
the final regulations remove the automatic extension of time to file
the Form W-2 series (except Form W-2G) and forms reporting nonemployee
compensation.
With regard to the request for a regulatory flexibility analysis in
the case of the removal of the automatic extension of time to file the
Form 1099 series, the only affected forms are forms reporting
nonemployee compensation. As certified in the Special Analyses section
of this Treasury Decision, the Treasury Department and the IRS have
concluded that these regulations will not have a significant economic
impact on a substantial number of small entities. As a result of this
certification, a regulatory flexibility analysis is not required.
With regard to Form 1094-C and the Form 1095 series, the comments
stated that preserving the automatic extension of time to file would
allow health insurers to maintain their current processes. The Treasury
Department and the IRS agree with these comments and, therefore, the
final regulations retain the automatic extension of time to file Form
1094-C, Form 1095-B, and Form 1095-C.
IV. Comments About Forms W-2 and Reliance on Information or Actions by
Third Parties
Comments stated various reasons why the automatic 30-day extension
of time
[[Page 38027]]
to file Form W-2 should be retained. Comments stated that to prepare
Form W-2, filers rely on third-party payment information from states on
sickness and disability payments that is not due to the filers until
January 15, and filers have no control over the timeliness and accuracy
of this third-party information. The comments also stated that Form W-2
filers rely on third-party information that they receive after the end
of the tax year for nonqualified moving expenses, prizes and awards,
the value of company housing and travel, and non-cash fringe benefits.
As discussed under section II and reiterated under section III of
this Summary of Comments, removal of the automatic extension of time to
file the Form W-2 series (except Form W-2G) will contribute to the
reduction of refund fraud and is consistent with section 201 of the
PATH Act and its supporting regulations. The Treasury Department and
the IRS understand that there may be some situations that will
necessitate filers to seek a non-automatic extension of time to file;
for instance, when a filer does not timely receive the statement of
sick pay required under Sec. 31.6051-3(a)(1). Removal of the automatic
extension, however, will increase the number of Forms W-2 received by
the IRS early enough in the filing season for the IRS to verify
information and reduce payment of fraudulent refunds.
V. Comments on Form 1042-S, Reclassification of Distributions, and
Additional Burdens
Comments stated that corrections are sometimes necessary after the
statutory deadlines to file certain returns, such as Form 1042-S,
because of reclassifications of distributions. Information regarding
these reclassifications is not available until sometime between mid-
January and the end of February. If Forms 1042-S must be filed without
the benefit of an automatic extension of time to file, then it is more
likely that they will have to be amended later based on the
reclassification information. Comments added that software vendors
typically release their software in late February for Form 1042-S, and
that there is not enough time to format information and test the
software prior to the March 15 statutory due date. Comments also
mentioned that filers regularly seek extensions of time to furnish
recipient statements for Form 1042-S in addition to extensions of time
to file, and the comments advised that the IRS should expect an
increase in the filing of both amended information returns and amended
income tax returns as a result of the unavailability of the automatic
extension, particularly for Form 1042-S. Comments further added that
updates to the Form 1099 series resulting from the Foreign Account Tax
Compliance Act, Public Law 111-147, Title V, Subtitle A (124 Stat. 71,
97), and sections 6050W and 6045B require year-end system upgrades and
testing, which must be performed by the same people who otherwise
implement the year-end compliance processes and therefore increase,
rather than decrease, the time needed to file. Finally, the comments
mentioned that information that flows from partnership returns or
upstream withholding agents is not available until March 15.
As discussed previously under section II of this Summary of
Comments, these final regulations do not remove the automatic extension
of time to file information returns other than the Form W-2 series
(except Form W-2G) and forms reporting nonemployee compensation.
Therefore, the comment that Form 1042-S should remain eligible for the
automatic extension of time to file has been adopted. However, the IRS
continues to study the appropriateness of the automatic extension of
time to file Form 1042-S.
VI. Comments on Penalties
One comment suggested that, given filers' potential inability to
comply with the statutory filing dates, filers should have reassurances
that the IRS will grant the non-automatic extension of time to file so
that they do not face penalties. The comment therefore requested that
specific criteria for granting the non-automatic extension should be
published in the final regulation. The comment also stated that the
proposed requirement to show extraordinary circumstances or catastrophe
is too strict a standard to impose on the extension process. The
comment further stated that penalties would be unreasonable where a
request for an extension of time to file was not granted, and the
process of seeking relief if penalties were imposed in these situations
would be arduous. In addition, the comment stated that despite the new
$100 de minimis error threshold exception for penalties, there would
still be a substantial number of errors that would exceed the de
minimis threshold and require correction. Also, comments noted that the
increase in errors in information returns filed with the IRS as a
result of not obtaining an extension of time to file might lead to more
penalty notices, which would increase the burden on filers seeking
relief under reasonable cause. This increase in penalty notices would
also increase the burden on the IRS, which would have to handle many
more requests for abatements or waivers of the penalty.
The Treasury Department and the IRS considered these comments and
agree that it is appropriate to set forth the specific criteria under
which the IRS will grant the non-automatic extension of time to file.
Since publication of the temporary and proposed regulations in 2015,
Form 8809 has been revised to provide specificity around the criteria
for when a non-automatic extension will be granted. When Form 8809
allowed the filer or transmitter to provide a narrative explanation of
the need for an extension, it was difficult to review the explanations
in a timely manner because of the length of some of the explanations
and the various ways that filers or transmitters would describe the
reason for the extension request. To eliminate this issue, the form has
been revised to provide checkboxes for the filer or transmitter to
indicate the reason for the extension request.
The IRS intends to update Form 8809 in time for the 2019 filing
season to provide that a non-automatic extension of time to file will
be granted if and only if (1) the business suffered a catastrophic
event in a Federally Declared Disaster Area that made the business
unable to resume operations or made necessary records unavailable; (2)
fire, casualty or natural disaster affected the operation of the
business; (3) death, serious illness, or unavoidable absence of the
individual responsible for filing the information returns affected the
operation of the business; (4) the information return is being filed
for the first year the business was established; or (5) the filer did
not receive timely data on a third-party payee statement. This third-
party payee statement might be a Schedule K-1, ``Partner's Share of
Current Year Income, Deductions, Credits and Other Items,'' Form 1042-
S, or the statement of sick pay required under Sec. 31.6051-3(a)(1).
Additionally, the extension will be granted even if the filer receives
the third-party payee statement by the statutory furnishing deadline,
provided that the filer did not receive the statement in time to
prepare an accurate information return.
These five criteria will all be set forth in checkboxes on Form
8809. The first four of these criteria are already present on the form,
with non-substantive differences in phrasing, and were derived from the
reasons for which the IRS would grant a non-automatic extension of time
to file during recent years when a narrative explanation was permitted.
The fifth criteria will be
[[Page 38028]]
added to Form 8809 in response to comments about reliance on third-
party information. The Treasury Department and the IRS request comments
on these criteria and welcome comments suggesting additional criteria
that should be added to Form 8809 as reasons to grant the non-automatic
extension. Interested parties can address the existing criteria and
suggest new criteria by submitting comments on Form 8809 at https://www.irs.gov/FormsComments.
Also, with regard to the comments about the potential increase in
errors and penalty notices, penalty abatement may be available for
filers who fail to file timely but do not receive an extension of time
to file. Although requests for abatement may increase under the new
rules, the IRS is prepared to consider those additional requests. The
Treasury Department and the IRS request comments regarding how the IRS
may reduce the burden on filers who request abatement.
Special Analyses
These regulations are not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Treasury Department and the Office of Management
and Budget regarding review of tax regulations.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that these regulations will not have a significant
economic impact on a substantial number of small entities. Although the
regulations may potentially affect a substantial number of small
entities, the economic impact on these entities is not expected to be
significant. If at least one of the criteria for granting an extension
applies, a business may obtain a 30-day extension of time to file by
properly completing Form 8809, so many businesses will still obtain an
extension of time to file. Prior versions of Sec. 1.6081-8 also
required businesses to file Form 8809 to obtain an extension, so no
additional economic impact is associated with the requirement to file
this form. For businesses that do not qualify for the extension, the
regulations do not impose new information reporting requirements, but
they do affect whether the filing due date may be extended. Although
there may be some additional costs associated with ensuring that
information returns filed by their statutory due date, as opposed to
the extended due date, are accurate, those costs will not impose a
significant economic impact on a substantial number of small entities.
In addition, statutory changes have minimized the benefit of the
automatic extension of time to file. Prior to these changes, most
filers had a due date (without regard to extensions) of March 31 for
the information returns currently subject to the rule eliminating the
automatic extension of time to file--the Form W-2 series (except Form
W-2G) and Form 1099-MISC reporting nonemployee compensation. With the
automatic extension, these filers generally had until April 30 to file
these information returns. The PATH Act and the accompanying
regulations accelerated the due date for the Form W-2 series (except
Form W-2G) and Form 1099-MISC reporting nonemployee compensation from
March 31 to January 31. Therefore, even if the automatic extension was
still available, the Form W-2 series (except Form W-2G) and Form 1099-
MISC reporting nonemployee compensation would be due much earlier than
under prior law, so the statutory change under the PATH Act is the
primary cause of any additional cost associated with having to file
these forms earlier in the filing season. Pursuant to section 7805(f)
of the Code, the notice of proposed rulemaking preceding these
regulations was submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small
business. No comments were received from the Small Business
Administration.
Drafting Information
The principal author of these regulations is Jonathan R. Black of
the Office of the Associate Chief Counsel (Procedure and
Administration).
Statement of Availability of IRS Documents
The IRS Revenue Procedure cited in this document is published in
the Internal Revenue Bulletin (or Cumulative Bulletin) and is available
from the Superintendent of Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.6081-8 is revised to read as follows:
Sec. 1.6081-8 Extension of time to file certain information returns.
(a) Certain information returns eligible for an automatic extension
of time to file--(1) Automatic extension of time to file. A person
required to file an information return (the filer) on the forms or form
series listed in Table 1 will be allowed one automatic 30-day extension
of time to file the information return beyond the due date for filing,
if the filer or the person transmitting the information return for the
filer (the transmitter) files an application in accordance with
paragraph (c)(1) of this section.
Table 1 to Paragraph (a)(1)
------------------------------------------------------------------------
Form or form series Name of form
------------------------------------------------------------------------
Form W-2G......................... ``Certain Gambling Winnings''.
Form 1042-S....................... ``Foreign Person's U.S. Source
Income Subject to Withholding''.
Form 1094[dash]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..................
Form 1098 series..................
[[Page 38029]]
Form 1099 series (except forms
reporting nonemployee
compensation).
Form 5498 series..................
------------------------------------------------------------------------
(2) Non-automatic extension of time to file. One additional 30-day
extension of time to file an information return on a form listed in
paragraph (a)(1) of this section may be allowed if the filer or
transmitter submits a request for the additional extension of time to
file before the expiration of the automatic 30-day extension of time to
file. No extension of time to file will be granted under this paragraph
(a)(2) unless the filer or transmitter has first obtained an automatic
extension of time to file under paragraph (a)(1) of this section. To
request the additional 30-day extension of time to file, the filer or
transmitter must satisfy the requirements of paragraph (c)(2) of this
section. No additional extension of time to file will be allowed for an
information return on a form listed in paragraph (a)(1) of this section
under Sec. 1.6081-1 beyond the extensions of time to file provided by
paragraph (a)(1) of this section and this paragraph (a)(2).
(b) The Form W-2 series (except Form W-2G) or forms reporting
nonemployee compensation. Except as provided in paragraph (f) of this
section, the filer or transmitter of an information return on the Form
W-2 series (except Form W-2G) or a form reporting nonemployee
compensation may only request one non-automatic 30-day extension of
time to file the information return beyond the due date for filing it.
To make such a request, the filer or transmitter must submit an
application for an extension of time to file in accordance with
paragraph (c)(2) of this section. No additional extension of time to
file will be allowed for an information return on a form listed in this
paragraph (b) under Sec. 1.6081-1 beyond the 30-day extension of time
to file provided by this paragraph (b).
(c) Requirements--(1) Automatic extension of time to file. To
satisfy this paragraph (c)(1), an application must--
(i) Be submitted on Form 8809, ``Request for Extension of Time to
File Information Returns,'' or in any other manner as may be prescribed
by the Commissioner; and
(ii) Be filed with the Internal Revenue Service office designated
in the application's instructions on or before the due date for filing
the information return.
(2) Non-automatic extension of time to file. To satisfy this
paragraph (c)(2), a filer or transmitter must--
(i) Submit a complete application on Form 8809, or in any other
manner prescribed by the Commissioner, indicating that at least one of
the criteria set forth in the forms, instructions, or other guidance
for granting an extension applies;
(ii) File the application with the Internal Revenue Service in
accordance with forms, instructions, or other appropriate guidance on
or before the due date for filing the information return (for purposes
of paragraph (a)(2) of this section, determined with regard to the
extension of time to file under paragraph (a)(1) of this section); and
(iii) Sign the application under penalties of perjury.
(d) Penalties. See sections 6652, 6693, and 6721 through 6724 of
the Code for failure to comply with information reporting requirements
on information returns described in this section.
(e) No effect on time to furnish statements. An extension of time
to file an information return under this section does not extend the
time for furnishing a statement to the person with respect to whom the
information is required to be reported.
(f) Form W-2 filed on expedited basis. This section does not apply
to an information return on a form in the W-2 series if the procedures
authorized in Rev. Proc. 96-57 (1996-2 CB 389) (or a successor revenue
procedure) allow an automatic extension of time to file the information
return. See Sec. 601.601(d)(2)(ii)(b) of this chapter.
(g) Applicability date. This section applies to requests for
extensions of time to file information returns required to be filed
after December 31, 2018. Section 1.6081-8T (as contained in 26 CFR part
1, revised April 1, 2018) applies to extensions of time to file
information returns required to be filed before January 1, 2019.
Sec. 1.6081-8T [Removed]
0
Par. 3. Section 1.6081-8T is removed.
Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
Approved: July 13, 2018.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2018-16717 Filed 8-1-18; 4:15 pm]
BILLING CODE 4830-01-P
