In passing the Mortgage Relief Act (MRA), the Senate made some significant changes that will affect many taxpayers, and not all for the good.
Partnership Failure to File Penalties: Currently, a partnership that does not file a timely tax return is subject to a penalty equal to $50 per month multiplied by the number of the partners in the partnership. Under the MRA as proposed by the Senate, this penalty would increase to $85. So be sure to get those partnership returns timely filed.
S Corporation Failure to File Penalties: Currently, there is only a $100 penalty for failing to file an S Corporation return and this is rarely, if ever, imposed by the IRS. The MRA adds a penalty equal to the partnership return penalty. So, any S corporation that does not file on time will receive a penalty of $85/month per shareholder. THIS IS A MAJOR CHANGE that will affect thousands of taxpayers. Be sure to file proper extensions in March and get those S corporation returns filed by September 15th.
Gain on Sale of Residence Exclusion for Widows and Widowers: The MRA amendment by the Senate adds a nice little provision for those recently widowed. For two years following the death of their spouse, the exclusion is increased from $250,000 to $500,000.
These provision all now need House approval. Based on my experience, I see no reason the House would not approve them and would expect this bill to be enacted pretty much in its current form. I’ll let you know what happens as it moves through the Conference Committee and the floor vote of the House.
Warmest regards,
Tom