All About Business November 2018 Tax News
Did You Know a Due Date is Not a Deadline?
Two out of every seven years, April 15 falls on a Saturday or Sunday. For simplicity, we often refer to the next business day as the "due date" of the return or payment. But that is not correct. The actual due date of returns and payments is set by statute - the 15th of the month. When the due date falls on a weekend or holiday, returns and payments may be made on the next business day.
Interest computations, statutes of limitation, and extension periods all begin on the due date, April 15 for individual and calendar year taxpayers, even if April 15 falls on a weekend or holiday. The statute of limitations for proposing assessments and filing refund claims is normally four years from the date the return is filed, or one year from the date of payment. Tax returns filed before the due date are treated as if they are filed on the due date. For example, for a personal income tax (Form 540/540 EZ/540NR) or LLC (Form 568) return that was filed before April 15, 20x1, the due date is treated as April 15, 20X1, so the four year statute of limitations will expire on April 15, 20X5. But if a taxpayer takes advantage of the weekend grace period, and files the return on the following business day, then the four-year statute of limitations period ends four years from the date the return was filed.
Example: Not a Specific Date, But Period Such as 6 Months
If the 6-month period begins on August 31, the due date is the last day of February. If it is a leap year, the payment or return is due on February 29. In the opposite situation, if the 6-month period starts on February 28, the last day of the month, the notice is not late until September 1. It can be filed on August 30 or 31 and still be within 6 months of February 28. Unless, of course, that due date is a weekend or holiday, then it would be timely if mailed on the next business day as described above.
Example: Holiday Due Date
Tax returns for individuals and C corporations are due on the 15th day of the fourth month after the close of the tax year (generally April 15th). For the 2017 tax year returns due on April 15 the deadline to file was April 17, 2018. Because April 15 fell on a Sunday and April 16 was the District of Columbia's Emancipation Day, tax returns were due on the next business day. Although not a holiday in California, we, in collaboration with the IRS, observe the District of Columbia's Emancipation Day on April 16.
Example: Statute of Limitation
Taxpayers who filed their tax returns before the original due date are treated as if they filed on the due date, April 15, 2018. We may issue a notice or they may file a claim for refund by April 15, 2022. For taxpayers who filed their tax returns on Tuesday, April 17, 2018, we may issue a notice or they may file a claim for refund four years from the date the return was filed. But because April 17, 2022, falls on a Sunday, a notice or claim for refund will be timely if mailed on Monday, April 18, 2022.
References: 18 Cal. Code Regs. Section 18566 (return due dates); Calif. Civil Code Section 11 (general rule that action performed on the next business day after a weekend or holiday is timely); Cal. Code of Civil Proc. Section 12 (Computation of time for performing acts required by law).