2020 Business tax returns are due 3/15/2021. In order to help prevent last minute extension filings, we have made the decision to begin filing Corporate extensions.
We understand that some of you hate the idea of extensions. . . We sort of understand since we are OCD like you. So here are some Facts and Myths about extensions for you.
Fact – The new COVID relief tax legislation passed in 2020 is complicated (PPP, ERC, HHS). We want to make sure we get your returns done the right way the first time. We do not enjoy amending returns even when we can bill you for it. We assume you don’t like to redo a filling or crown even if you can charge the patient. Same unhappy feeling for us.
Fact – States have not passed legislation that allows the state tax laws to agree to the federal tax laws. This happens every year but it is critical for your 2020 tax returns that we know how to treat the PPP expense deductions and other fun tax changes. If states do not agree to the federal laws (and they may not), the PPP expenses will need to be added back to the state tax returns. Since 99% of you have pass through business entities (1120S and 1065s), this means it will mean more state taxes for you to pay personally. This still is a good idea and saves you taxes in the long run by having a pass-through business.
Myth – If your returns are extended, the IRS is more likely to audit you. NOPE! We extend many of our clients, including ours and have NEVER had an audit generated because of the extension (business or personal).
Fact – We can file the federal extensions for the business returns by e-filing them. No tax is owed. This is because (again) your business return does not pay tax. You are paying tax when the K-1 from the business flows into your personal taxes.
Myth – When we file a state extension, the amount owed on the voucher we send you is a penalty for filing an extension. NO, NO, NO! Every state has a license fee and you have to pay that whether you extend or not. States want their money! We get the most questions on this when we extend business returns. There is NO penalty for filing an extensions for additional time to file. Not for state, not for federal.
Fact – If you need to fund profit sharing for your retirement, you can extend your business return and this gives you until September 15 but the expense is deducted in the prior year. How cool is that?
Fact - As we stated in a prior Eblast (Food for Thought), there are new rules for setting up a brand spanking new retirement plan for 2020. If you are interested, please let us know and we can help you decide if this would be a tax advantage for you. The new plan can be set up through September 15 if your business return is extended.
Myth - All we have to do to prepare your tax returns, is put the information into our software. WRONG! Each of you are individual and are unique. We put much thought into the preparation of your returns so each and everyone of you gets the most benefit available based on your individual circumstance.
Fact – This tax season is going to be a challenge for us. Last year was the all-time greatest challenge of our CPA careers and this one has the makings for a second contender. So thank you in advance for your continued patience. We are pedaling as fast, rowing the boat, jogging as quickly, as we can. You get the drift...
Your Actions Steps for Business Return Extensions:
Your extension, including instructions will be sent to your Tax Portal.
Action 1: Register your tax portal through the email you received last week.
Action 2: Watch for your email notification. You will receive an email notification when your extension information has been sent to your portal.
Action 3: Read extension instructions and mail required state payments with the extension.