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Why You Should Put Your Business Clients on Extension

Why You Should Put Your Business Clients on Extension

Note: The tax filing and payment deadline for 2019 tax returns has been delayed from April 15, 2020 to July 15, 2020.

As you may have noticed, it generally makes your life easier if you can put most of your business tax returns on extension.

I know, some of your clients are super organized, or you're handling the write-up or accounting, so everything is ready in time. You definitely want to file early - and get paid your hefty fees.

But! But! These days, we have so many new and twisted issues and elections we may need to make on our clients' business returns, that it may be a better idea to put them on extension - to buy time to figure out all the things that apply to your client's particular business or industry.

After all, if an election has to be made (depreciation, accounting method, various credits, various deductions, whatever), the election must be made on a timely filed tax return. Sure, some elections allow you to amend within 6 months of filing. But, usually by the time you realize you missed the election, it's too late to meet that deadline.

What are some things you need more time to figure out?

  • Do they qualify for the Sec 199A 20% Qualified Business Income Deduction (QBI)?
  • Are they an SSTB - Specified Service Trade or Business?
  • Is only a part of the business an SSTB, while another part is not?
    • If yes: you may split up a business into two parts for the QBI
    • Think about a pharmacist who owns his pharmacy.
      • His work is a medical service = SSTB
      • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
    • His work is a medical service = SSTB
    • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
    • His work is a medical service = SSTB
    • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • If yes: you may split up a business into two parts for the QBI
  • Think about a pharmacist who owns his pharmacy.
    • His work is a medical service = SSTB
    • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • His work is a medical service = SSTB
  • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • His work is a medical service = SSTB
  • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • If yes: you may split up a business into two parts for the QBI
  • Think about a pharmacist who owns his pharmacy.
    • His work is a medical service = SSTB
    • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • His work is a medical service = SSTB
  • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • His work is a medical service = SSTB
  • His sales of all the other non-prescription products are not SSTB sales and don't qualify for the limitation.
  • Are they subject to the interest expense deduction limitations and the global intangible low-taxed income (GILTI) taxes?
    • Generally, businesses who meet the small business definition don't need to worry about it (or so I thought)
    • However, taxpayers who have investments in pass-through entities (partnerships, S corporations, LLCs) that are subject to the interest income limitation may be affected
  • Generally, businesses who meet the small business definition don't need to worry about it (or so I thought)
  • However, taxpayers who have investments in pass-through entities (partnerships, S corporations, LLCs) that are subject to the interest income limitation may be affected
  • Generally, businesses who meet the small business definition don't need to worry about it (or so I thought)
  • However, taxpayers who have investments in pass-through entities (partnerships, S corporations, LLCs) that are subject to the interest income limitation may be affected
  • What depreciation method is the correct one for each of the different classes of assets purchased by the taxpayer?
    • Section 179
    • Bonus depreciation (requires electing out if not using 100% bonus depreciation)
    • ADR, GDS, MACRS
    • Luxury vehicle limits - vs mileage (which includes depreciation)
  • Section 179
  • Bonus depreciation (requires electing out if not using 100% bonus depreciation)
  • ADR, GDS, MACRS
  • Luxury vehicle limits - vs mileage (which includes depreciation)
  • Section 179
  • Bonus depreciation (requires electing out if not using 100% bonus depreciation)
  • ADR, GDS, MACRS
  • Luxury vehicle limits - vs mileage (which includes depreciation)
  • Can they still set up a retirement plan for last year?
    • The SECURE Act has some new provisions - do they affect 2019, or start in 2020?
  • The SECURE Act has some new provisions - do they affect 2019, or start in 2020?
  • The SECURE Act has some new provisions - do they affect 2019, or start in 2020?
  • Should they amend the 2018 tax return before filing for 2019?
    • Both the Setting Every Community Up for Retirement Enhancement Act (SECURE Act); and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) have provisions retroactive to 2018
  • Both the Setting Every Community Up for Retirement Enhancement Act (SECURE Act); and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) have provisions retroactive to 2018
  • Both the Setting Every Community Up for Retirement Enhancement Act (SECURE Act); and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) have provisions retroactive to 2018

These are just some of the issues to consider that you need to think about before filing.

Putting the clients on extension will give you time to think through the law changes that affect them.

The latest edition of my book Small Business Taxes Made Easy contains complete updates about the business considerations, from the PATH Act of 2015, up to and including the Setting Every Community Up for Retirement Enhancement Act (SECURE Act); and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA). The new book will be available by April 1st at the latest.

Even better news: Starting in May, I will be teaching a 12-part series of courses at CCH CPELink (will be added to the schedule this month) based on the first 12 chapters of the book. Please join me and invite your clients.

They will understand why they need to consult you to rebalance their tax and business plan each year.

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Eva Rosenberg, EA

Eva Rosenberg, EA

Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. Eva is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and other tax courses at http://www.cpelink.com/teamtaxmama.

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