It may work out that way for partnerships where all the accounting is done under the client’s roof, such as with an operating business or a family entity involving real-property rentals, says Rose. But he doesn’t see investment partnerships meeting the March 15 due date when, heck, many couldn’t make the old April deadline.
A chief concern is that “there is going to be a real timing crunch for accountants, especially in states that haven’t changed their laws to follow the federal changes, like Massachusetts,” says Michael Barbera, a CPA and principal of the accounting firm Edelstein & Company LLP in Boston. Bay State accountants face the prospect of returns for both their partnership and C corp clients falling due on March 15, the former at the federal level, the latter when they must meet state filing requirements. “That’s a lot of work in two and a half months,” Barbera sighs.
Wisconsin and Illinois tax pros face a similar situation as of this Labor Day writing, according to Wolters Kluwer analyst Timothy Bjur.
Accounting firms everywhere could be so jammed trying to meet the sped-up partnership deadline that clients who historically have filed early may not be able to, and more clients could require extensions, particularly if the accounting firm they use prepares a lot of partnership returns, Barbera says. “This is very big.”
Advisors can help by getting clients to help their accountants. Clients should begin gathering tax data now. Business owners should be talking with their accountant about ways to close the books fast once the year ends, Barbera says. “Do any testing for audits that you can prior to year-end, and get information to the accountant at the beginning of January, especially if the business files in multiple states—who’s working in what state, the sales in each state,” Barbera says.
The advice is similar for clients who file FinCEN Report 114—the Report of Foreign Bank and Financial Accounts, or FBAR. Now it is due with the client’s individual tax return in April, versus June 30 in prior years, adding to tax practitioners’ spring workload. “We’re reaching out to our clients who have foreign bank accounts to begin compiling the information,” Barbera says, adding that the FBAR filing can be extended along with the client’s individual return.
Improve Relationships Now
Tax-planning time is an opportunity for advisors to provide value to clients by quarterbacking their financial team.
Rose, the Encino CPA, says, “It is a really good idea for the financial advisor to get permission from clients to send a quarterly report to their accountants to make them aware of any meaningful transactions. Open communication between all the client’s advisors during a transaction is often the difference in making a transaction really impactful.”
Finally, make sure your clients are with the right accountant, advises John Wheeler, a senior financial consultant at Castle Wealth Advisors in Indianapolis. “If the client has developed a good working relationship with the accountant, then they’re doing tax planning. If they haven’t, then they’re not,” Wheeler says. “We’re encouraging clients to develop that relationship by asking the accountant questions, and if the accountant is hesitant in talking to them, we suggest they find somebody else.”