Extension Deadline: S Corp, Partnership, and Trust/Estate

Extension Deadline: S Corp, Partnership, and Trust/Estate

Will I See You in September? (So sayeth your S Corp, Partnership, and Trust/Estate extension clients)

Believe it or not, September 15 is fast approaching. So are all of those extensions you filed back in March when September seemed so far away. And now, here we are…not to mention third quarter estimated tax payments that are also due on the 15th. IRS Publication 509 provides all of the 2019 due dates.

…Have a good time but remember
There is danger in the summer moon above
Will I see you in September
Or lose you to a summer love?
(I’ll be alone each and every night)
(While you’re away, don’t forget to write)
-The Happenings, “See You in September”

There is no additional extension in time to file and as mentioned in a previous posting, the late filing penalties can be severe. But fear not – there are still planning and tax saving ideas for 2018 you can utilize. Also, you now hopefully have the benefit of knowing eight months of your clients’ tax situation for 2019, which should greatly influence what you suggest for 2018 (assuming you can get your client to provide some 2019 info).

What I don’t have for you is some late summer magic to get your clients moving on providing what’s needed or to get you more hours in the day. Bye bye, so long, farewell

Some ideas which can still be used on 2018 extended returns:

• §179 expense election – up to $1 million dollars—yep…you can elect §179 on an extended return.
• 100% bonus depreciation, which is also good for used property in 2018—you can choose to opt out or take the default for full bonus on the return you will be filing now. And with some information provided by your client for 2019, you may have a clearer picture as to whether it will be better to take as much depreciation as possible on the 2018 return or perhaps elect out of bonus and ‘save’ some deductions for 2019.
• Simplified Employee Pension (SEP) funding, which is due by the extended due date of the entity return. For the extended returns due in September, we are talking about a percentage of wages for S Corp employees or guaranteed payments plus distributive share of profit for partners in partnerships.
• Larger expenses…Perhaps your client can have larger expenses in 2018 (if desired) thanks to the TCJA.  If your client’s books and records accurately reflect cash accounting and do not capitalize costs or maintain inventory, the TCJA generally provides that businesses with less than $25 million in gross receipts can now choose to:
  • Use the cash method of accounting instead of accrual under IRC §448(c));
  • Not be forced to capitalize additional costs into inventory (UNICAP rules under IRC §263A(i));
  • Treat inventories as nonincidental materials and supplies or use an inventory method that matches their books and records (IRC §471(c));
  • Not be forced to use the percentage of completion method under IRC §460(e)(1)(B)).

If the taxpayer changes their accounting method, these changes require consent. You get the consent of the IRS by filing Form 3115, Application for Change in Accounting Method. The form is filed either under “automatic” or “advance consent” procedures. Consent is considered to be completed when the filing is under the automatic procedures as long as the Form 3115 is attached to a timely filed federal tax return and also separately filed with the IRS. The current list of automatic method changes may be found in Rev. Proc. 2018-31.

Tell me more, tell me more
How much dough did he spend?

Tell me more, tell me more
Could she get me a friend?

…It turned colder that’s where it ends
So I told her we’d still be friends
Then we made our true love vow
Wonder what she’s doing now

Summer dreams
Ripped at the seams
But oh those summer nights
-John Travolta and Olivia Newton-John, “Summer Nights” from Grease

While my “planning” ideas seem to center around deductions, let’s not forget the impact of the QBID, which rewards a taxpayer for making money as opposed to spending money (thanks to Sue Voth for that bit of tax moxy). But, I caution you to consider that when we do all of these write offs and create losses—these losses for business activities are qualified business losses (QBLs) and will have to be carried forward to reduce future QBIs. Therefore, tread lightly and stay (and keep your clients) informed.

Hey—let’s not forget those 1041s on extension as well. They, too, are due on September 15!

Wait —I have a reprieve for you!  The extended filing deadline for those extensions and the estimated tax payments is Monday, September 16th because the 15th falls on the weekend!

Party On!

…There was a
Ba de ya, say do you remember
Ba de ya, dancing in September
Ba de ya, golden dreams were shiny days

The bell was ringing
Our souls were singing
Do you remember, never a cloudy day

There was a
Ba de ya, say do you remember
Ba de ya, dancing in September
Ba de ya, never was a cloudy day
There was a
Ba de ya, say do you remember
Ba de ya, dancing in September
Ba de ya, golden dreams were shiny days

Ba de ya de ya de ya
Ba de ya de ya de ya
Ba de ya de ya de ya de ya
Ba de ya de ya de ya
Ba de ya de ya de ya
Ba de ya de ya de ya de ya
– Earth Wind and Fire, “September”

As soon as you finish your ‘Ba de yas’ get yourself ready for the October 15 extensions for personal and C corp returns!

by Tom O’Saben, EA