Opening Gate: Just crossed off one-deadline – the 3/15 for S-Corps and Partnerships – either had to be filed or extended. We placed just under 70% of those on extensions this year, that’s a little up from historical norms but not by much.
In keeping with our theme, within this post I’ll try and interject a little personal reflection – and not have it so technically dominant – but rather, hopefully, a human experience. My goal is to put one of these out the 15th of each month. The intent is to hit areas that are interesting to me, and thereby, my clients, friends, and community by association.
Buoy 1: Quote that pertains: In Warren Buffet’s shareholder letter (published 2/23/19) he quotes Abraham Lincoln – so I’m quoting the Oracle of Omaha quoting Honest Abe: “Abraham Lincoln once posed the question: ‘If you call a dog’s tail a leg, how many legs does it have?’ and then answered his own query: ‘Four, because calling a tail a leg doesn’t make it one.'” Warren Buffet further commented that “Abe would have felt lonely on Wall Street.” We get a lot of folks who have ideas, thoughts, interpretations, ‘my friends accountant said’ and while it is our job to listen, consider, learn, interpret and apply – it is critical that we hold true to the facts and not be persuaded or confused. That is why I am so proud of the effort our team and staff put in this past summer and fall – training and learning so much about this new tax code, and getting that information out to our clients, that it has actually made this tax season one of our smoother ones. You have to put in the hard work to have the conviction.
Buoy 2: Sticking with Warren Buffet’s shareholder letter – in tribute to America and its military personnel he comments on the ‘American Tailwind’ in regards to the good fortune we all have by conducting our business and lives here: “It is beyond arrogance for American businesses or individuals to boast that they have ‘done it alone,’ …[looking forward] “the major source our of gains will almost certainly be provided by The American Tailwind. We are lucky – gloriously lucky – to have that force at our back.”
Many work hard, many “boot-strap” it, but it’s certainly important for all of us to be grateful for our ‘glorious luck’. On our little spit of sand we would be wise to keep that sentiment in mind as we look to support one another – to be geographically correct, you could say “a rising tide lifts all boats.”
Buoy 3: Did somebody mention the new tax law?… Vox.com reports that America’s banks made a record $236.7 billion in profits in 2018. Of that, the FDIC says $28.8 billion can be directly linked to the the new tax law.
Buoy 4: The Wall Street Journal shares that despite low unemployment, American workers’ slice of the economic pie continues to shrink. Employee pay and benefits fell to 52.7 percent of the nation’s economic output during the third quarter last year – down from 57 percent in 2001. If the workers’ share were still 57 percent, they would have $800 billion more in their pockets, or $5,100 more per worker.
Buoy 5: Tax Reform note: Tax return preparation fees are no longer deductible on Schedule A as the tax reform axed all miscellaneous deductions subject to the 2%-of-adjusted-gross-income threshold.
However… if you file Schedule C (Profit or Loss from Business) or Schedule E (Supplemental Income or Loss from Real Estate) you can still write off part of the coast. In a 1992 revenue ruling the IRS said that tax return preparation expenses incurred in preparing these schedules are deductible in calculating AGI…meaning they are above-the-line deductions.
Buoy 6: Tax season actions that need to be taken by April 15th (for calendar year operations) and individuals:
– Filing “C” Corporation returns – for those needing extra time, or it’s part of the plan, or want to defer payment into retirement plan arrangements can file Form 7004 with the IRS to request and automatic 6 month extension.
– Making contributions for 2018 to their pension and profit sharing plans. (Note, as alluded to above, companies that file an extension can get an extra 6 months to fund their plans.
– Making Traditional IRA and ROTH IRA contributions need to be made by April 15th – no extensions available here.
– Individual tax filings are due on April 15th (Massachusetts and Maine have until April 17th) – for those needing extra time, filing Form 4868 with the IRS grants you an automatic 6 month extension. NOTE: Even if you extend the time for filing your tax return, you must pay the amount due for the tax year. An extension is for filing, not payment. In Massachusetts, if you file for an extension, and at the end you’ve paid less than 80% of your tax burden, the commonwealth nullifies your extension filing and therefore your return is considered late, incurring additional penalties.
Closing Gate: I would love any feedback you have to offer – good, bad or ugly – use the comments, the contact form or simply shoot me an email. Hope everyone has a great month!