Deduction

[Jakyasar]

Hi

Client files the LLC (single member - schedule c) tax return on 4/15 with no extension but the actual return was extended to 7/15/2020.

I just got the info and found out that additional contributions will be required for 2019. 

As the filing was extended to 7/15/2020 with no extension filing requirements, I believe the client can make the additional contribution and deduct for 2019 i.e. redo the tax return.

Thank you for your comments.

[Larry Starr]

8 hours ago, Jakyasar said:

Hi

Client files the LLC (single member - schedule c) tax return on 4/15 with no extension but the actual return was extended to 7/15/2020.

I just got the info and found out that additional contributions will be required for 2019. 

As the filing was extended to 7/15/2020 with no extension filing requirements, I believe the client can make the additional contribution and deduct for 2019 i.e. redo the tax return.

Thank you for your comments.

You are (probably) correct. I agree with you, but there are some people who say that once you file your return by your regular due date, any extension received is null and void.  I don't agree, but I  prefer that under normal conditions client wait until a day AFTER the regular due date and then file under their extension so now they clearly do have to the end of the extension period to add more money (and file an amended return).  

What is different here is that IRS extended the original due date, so I think you are not operating under an actual extension, but a moving of the regular due date, and therefore you are still BEFORE your regular filing date and you can put more money in and file the amended return, but you are still not on extension. 

Short answer: I agree with you.

 

[spiritrider]

Short answer, I agree with Larry.

The delay until 7/15 is actually a postponment of the tax filing deadline it is not an extension. 7/15 is the new due date. An extension if elected by 7/15 is until 10/15.

Sometimes semantics matter. While in press releases and other communications the IRS and just about everyone else has incorrectly used the term "extended". In the actual guidance, the IRS has explicitly used the term "postponed". 

Why the semantics matters, is that this has all been done under the IRS' statutory authority of Section 7508A Authority To Postpone Certain Deadlines By Reason Of Presidentially Declared Disaster... When the IRS "postpones" a deadline under this section, it applies to all other code sections referring to the appropriate deadline.

Also, I agree with Larry's other point if an extension had been filed.

"but there are some people who say that once you file your return by your regular due date, any extension received is null and void."

Those people are quite simply incorrect. Contribution deadlines are specifically only referenced to the tax filing due date and for employer plans optionally the extended tax filing date. Just like you have until the tax filing due date to make IRA contributions regardless of when you file. You have until the tax filing due date including extensions to make employer plan contributions regardless of when you file. Of course, you have to either presumptively taken the deduction or file an amended return.

 

[Jakyasar]

Thank you both for your comments/insights, never a dull moment.

Be safe and have a great weekend.