How to avoid extensions?

[Jiggers]

Do many of you want extensions after 4/15 so that you have work extending through the year?

I always have about 20 - 30 extensions from the same clients, year after year.

I have plenty of other work to do such as monthly write-up for a few clients, payroll reports, and 2 FYE 3/31 corporations that are very large and take a lot of time to work on.

I am tired after the 8-day 80+hour weeks from January 1 - April 15 and try to cut back some by going to a 4-day week May 1 - December 31.

I also take my vacation and other time off during the off-season. Plus I have many honey-do's and yard and home maintenance in the off-season. Including my garden.

And every year in September I am fiddling with procrastinators who haven't brought in their information yet. I send out letters in August giving a mid-September due date, yet clients still bring in their information late. I had one bring me stuff 10/14. His is still not done.

I may or may not get them out, but I am really tired by 10/15 and don't want to work on returns. Plus I have payroll reports due 10/31.

So, how do you stop this?

Refuse to do any extensions?

I add $100 to the return fee for doing returns in September and October. Clients don't mind.

[Lion]

Raise the fee

You could raise the $100 fee to $500. Or, send out a letter 16 April to all on extensions telling them you will not accept their information after 31 August, or whatever cut-off date you choose. Stick to it, and have the number of your local HRB or a new, hungry preparer to hand out.

I could never do the number of returns (and make the amount of money) by 15 April that I can do by 15 October. But, I have one year-round bookkeeping gig and a couple of fiscal year non-profits and always a few corporations who have a couple prior years at a time that I save until after tax season. So, this year when so many brought in their information so late, I'm tired and stressed. As you say, I have to catch up on laundry and doctors' appointments and fit in much of my education. This year, I want to swap out some furniture in my home office and, hopefully, get new computers -- both projects will result in some down time.

I'm going to contact clients earlier next year to get them in earlier. Already bought some postcards, and will compile an email/telephone list with boxes to check off for contacts made, appointments made, information received, etc., to track how I'm doing. And, add fees to those who are late in the year or late with certain information or..... I want to work year-round, but also want more control over my time, be able to block out vacations without staying up all night before I leave, etc.

I know I'm a procrastinator myself, so I'm looking for all your time management ideas. I can't make myself over all at once, but I can add a step or two now.

[BHoffman]

August 31st Deadline

I send a letter with a copy of the extension form to the 1040 extenders on 04/16. The letter says that I cannot prepare their tax returns unless I have all their documents in good order on or before 08/31. I'm not mean about it and apologize for any inconvenience. But the tone of the letter is firm and sounds non-negotiable. I feel like a teacher dealing with students who won't submit their homework, and I don't like it.

The first year I tried this, I got phone calls with sob stories and pleas for more time. I told a few clients that they have to go elsewhere because I'm inundated with extensions and just will not have time to prepare theirs.

It's a case-by-case decision because once in a while we're all waiting for that K1. A few sneaky folks have tippy toed into my yard, during the first week of Sept., in the dead of night and deposited their docs into the mail slot so silently that the dog isn't even alerted. I give them points for stealth and usually will prepare their returns if their docs are complete and in good order. If not, I mail their stuff back to them with a canned letter of apology.

This is after two years of sitting at my desk at 3PM on 10/15 crying real tears of frustration, and I don't cry easily. I ended up firing a total of 4 clients and I don't miss them - financially or otherwise. I have one self-employed guy who shows up at the last minute and I let him just because I like him.

This is the 3rd year of the 08/31 deadline and my existing clients are completely cooperative and understanding. I'm always finished well before 10/15.

My pre-season letter contains a paragraph that spells out the fact that an extension to file does not mean an extension to pay. This has, I believe, made some difference as well.

[dyne]

I simply refuse to prepare a form 4868 extension for anyone and I advise them that I do NOT prepare delinquent returns or returns for those who have filed an extension. I refer such people to a local CPA. The result is that I have a better group of clients and am not rushed before Oct 15 and my business gross receipts are larger than when I prepared extensions years ago.

[JohnH]

I'm just the opposite. My average fee for returns prepared after Apr 15 is higher, because I tend to extend the more complicated returns and I'm blessed with lots of clients who don't mind extensions. As a matter of fact, I refuse to accept any returns after mid-March unless the client agrees to filing an extension. As I see it, the extension takes Apr 15 off the table and it becomes just another average work day for me.

As for Jigger's original question on how to handle the "problem", I think Dyne has it right. Just make it a policy that you don't do them. If people can't live with that, then they need to go somewhere else. Or maybe up charge them by $500 or some other amount that you can't afford to turn down if they insist on the extra convenience. Surely there's some fee that would increase your enthusiasm - let the law of supply and demand govern your decision and that of the client.

[joanmcq]

A lot of my extensions are my higher billing clients. Most get me at least enough stuff by 4-10 so that I can work up the extensions and figure out what they have to pay. Some that have refunds are happy to come in May or June when I'm less busy. Most of the really late filers have their returns essentially complete, where I'm waiting for that one last piece of info, so the actual finishing of the returns doesn't take but a little bit of input and printing out their copy. These I don't mind. What I mind is the one that makes two appointments to drop off the rest of their stuff (even though I've suggested using my locked drop-box) and then doesn't show. I didn't even call him on the 15th. He's late and I don't care.

[FEDUKE404]

Never file extensions?

I simply refuse to prepare a form 4868 extension for anyone and I advise them that I do NOT prepare delinquent returns or returns for those who have filed an extension. ....

That's an interesting approach.

While I always encourage my clients to file by April 15th, for any number of reasons that is not always possible. Over the years I have had clients who run into family emergencies, inability to get all investment records, and other surprises yet they (and I) readily agree to an extension. I have no clients (other than myself ) who regularly ask for extensions, but over the years I have had many clients who due to circumstances had to file extensions.

Quite frankly, for some very complicated returns I prefer not to have the April chaos coming into play. Better to take a deep breath, file an extension, and prepare an accurate return later versus walking through the mind fields of sleep deprivation et al that can loom in early April.

I do, as others have noted, stress very firmly that such extensions are NOT extensions of payment and that a realistic "estimate" of tax liability is necessary along with the payment of any balance due. In such cases, we always "aim high" with the dollar amount paid, and either get a direct-deposit refund or apply the extra to the following year.

Most of my extended returns, and there are NOT that many, are generally completed by mid-June. I do not see that as a problem, and neither do my clients.

Filing an extension, especially with computer software and automatic debit (using Form 8878) is quite easy and takes a minimal amount of time using what is already "rattling around" in your computer.

FE

[JohnH]

I don't even stress the idea that the extension isn't an extension of time to pay, because in reality it is both an extension of time to file AND an extension of time to pay. Some very clever wording by the IRS obscures that point somewhat, but the fact is that the extension really covers both filing date and payment, provided the client is willing to pay approximately 1-1/4% per month on the balance due. If it REALLY were not an extension of time to pay, then a balance due would invalidate the extension retroactively to the original filing date.

[geekgirldany]

This was the first year that I told people coming in after March 31st that I could not guarantee I would finish their return by April 15th. If I could not they would get an extension and I would not start on extensions until after May 15th.

Even though I said that I had a few that called after April 15th wanting to know if their return was completed. I would tell them no, I am working on payroll returns now and it would be after May 15th.

I let several clients go this tax season. Mostly those that were very demanding. I haven't regretted it.

Story One:

One got a little huffy because after looking at what she brought I would not prepare her returns. It was complicated with a partnership I did not want to get involved. Started another business and did not consult with me. Enough said. She kept on calling after April 15th even though I said I would not work on them until May.

She asked me "Why did you not tell me this before April 15th... you had time to do them... I could have taken it to someone else". I told her I had just now had the time to look over the paperwork and saw that I could not prepare them this year due to the complex partnership return. Added that she now can take them to someone else that can get them completed faster than me. She threw back that it wasn't that complicated. I finally said "go to someone else".

Second story:
Another one kept on calling right after April 15th. Brought his paperwork in for many rental properties towards the end of March. When I gave him the "warning" on extension he said to me he could go to another CPA... I told him to go ahead. He then backed off and said "well you have all the information".

Well after many calls before May 15th he finally told me he was going to a friend's accountant. I told him okay. He seemed surprised when I said it. I told him if he thought this accountant could get them done quicker then he needed to go there. He did.

I soon started getting calls wanting to know how this or that was setup in QuickBooks and also depreciation. I could understand the depreciation questions but I had everything setup very clean in QBs.

I told him if the accountant knows QBs then it should be very obvious how the assets and liabilities are set and that she needs to go back and look at the GJ entries for any other information. If she doesn't then she can hire me as an advisor at my hourly rate to explain how QBs works.

....Never heard from him again.

[equinecpa]

I have decided I MUST take a similar action. I had the worse 10/15 ever....

I am a confirmed dog lover and my dog of 12 years who is normally healthy had some kind of respiratory attack on the morning of the 14th. I took her to her veterinarian but at the end of the day the veterinarian was not comfortable with her status and referred me to an ER clinic. I took her there that evening and was there most of the evening before I dragged my butt home at about 11:30pm with the knowledge that my dog was given a 50/50 chance of making it through the night. I had to be back at the ER for 6:00 am on the 15th to pick her up and take her to another vet (this ER clinic is only a night time clinic). So the morning of the 15th I was up before 5:00 drove an hour to be at the ER for 6:00, drove another hour to another clinic. Completed paperwork, talked to vets, and drove the hour and a half back home to get to work...

A client followed me into the driveway begging forgiveness, asking if I'd do their taxes. The worse thing is I said yes...just because they are very nice people who have been dealt some terrible blows this past year.

I worked my tail off that day to get returns finished, answering the phone a thousand times, payments made etc. Then off to get my dog at 4:00 pm, home by 7:00 pm to finish efiling those last minute filers and still getting information from clients.

I practically keeled over with exhaustion. The pressure is just not worth it. Imagine if this was an emergency where I just couldn't be back and forth like I was? The returns would have been late and I would have had a bunch of irate clients just because I was trying to be nice. That nice couple dealt bad blows in life? They can still be responsible people and have their information to me on time.

I will now adhere to a policy all information must be in by 08/31 - I will explain to my clients it's for their benefit as well as mine.

And happily I can conclude my story by saying my dog is getting better.