Pennsylvania taxpayers impacted by Hurricane Irene and Tropical Storm Lee get an extension to October 31, 2011 to file state tax returns and make state tax payments that were due between August 26 and October 31. The extension applies to PA returns and taxes due during that time period for individuals, fiduciaries, partnerships, limited liability companies, and S corporations.
All original PA 2010 corporate tax returns as well as estimated and annual payments previously due on September 15 or October 17, 2011 for those residing in the impacted counties of PA as listed in the following paragraph, have an extended due date, Oct. 31, 2011.
The extension does not apply to sales tax returns and payments (although relief may be available through the usual administrative process).
For federal taxes, Lancaster County and its neighboring counties were not included in the federal tax deadline postponements for victims of Hurricane Irene. However, Tropical Storm Lee is another matter. For victims of Lee, President Obama has declared the following counties as "federal disaster areas": Adams, Bradford, Columbia, Cumberland, Dauphin, Lancaster, Lebanon, Luzerne, Lycoming, Montour, Northumberland, Perry, Schuylkill, Snyder, Sullivan, Susquehanna, Union, Wyoming, and York. Individuals who reside or have a business in those counties may qualify for tax relief.
For residents and businesses in these counties, any tax deadline falling between September 3, 2011 and October 31, 2011 has been moved to October 31, 2011.
In addition, the IRS has announced an extension to September 22 for returns due September 15 if the preparer is located in a disaster area or in an area under an evacuation order because of Lee.
When filing a paper return, write "Disaster Recovery 2011" at the top of the form. If E-filing, make sure to use the disaster designation within the federal return when filing.
The postponement of time to file does not apply to information returns in the W-1, 1098, 1099 series or to Forms 1042-D or 8027. Penalties for failure to file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after September 3 and on or before September 19, 2011 provided the taxpayer makes the deposits by September 19.
What can be worse than delays caused by Mother Nature? Delays caused by Congress.
Congress passes the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 on December 17, 2010. 2010 was the year with no estate tax. Sort of. For decedents with large estates, generally greater than $5 million during 2010, executors are given a choice: 1) pay the estate tax on assets in excess of the $5 million exemption and receive a step-up in income tax basis to date of death value on all assets, or 2) pay no estate tax at all and get no step-up in income tax basis EXCEPT for $1.3 million in basis that may be allocated by the executor to estate assets and another $3 million of basis step-up allocable to property passing to a surviving spouse. This option requires the filing of a Form 8939 to report carry-over basis and basis allocation.
Clear and simple, right? If only it were.
The law that created the 2010 choice was passed in December 2010 - retroactive for anyone who died in 2010. The original deadline for filing the Federal Estate Tax Return Form 706 for 2010 decedents was September 17, 2011. (For someone who died in early 2010, this is a long time.) The IRS came out with a final form 706 for 2010 decedents only 11 days before it was due, so it's a good thing they extended the due date. (The IRS couldn't blame it on Hurricane Irene - they have had since December 2010 to work on it.) 2010 estates that timely file Form 4768 by today, September 19, 2011, asking for an extension will have until March 19, 2012 to file Form 706.
IMPORTANT NOTE: There is no further extension of the deadline for disclaimers. Disclaimers for 2010 decedents who died before December 17, 2010, must be made by today, September 19, 2011.
There will be no late filing or late payment penalties, but interest will be charged from the original due date of the tax.
The original deadline for filing Form 8939 was November 15, 2011. That was going to be challenging since the IRS has not yet released Form 8939. Now, executors electing option 2 and filing Form 8939 have until January 17, 2012 to file the form. I wonder when the IRS will release the form.
If a person inherited assets from the estate of someone who died in 2010 and then sold the asset in 2010, he or she will not know the basis of the property until the executor decides whether to take option 1 or 2. Therefore, failure to pay sufficient capital gains tax on inherited assets sold in 2010 will not be penalized as along as an amended return is filed within a reasonable time after learning of the actual basis of the property from the executor. The deadline for executors to furnish a statement to beneficiaries if filing Form 8939 is extended to February 16, 2012.
