What happens if a client uses the payment vouchers and mails in her payment to IRS and AZ on time, but fails to send me her 8879 forms and payment before 04/18? Should I file an extension and continue to call her? So far, no luck.
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Extension
I would probably file an extension, at least with respect to the federal return, since it doesn't require a signature. I think the real answer, on a case-by-case basis, depends on your comfort level and the relationship you have with the client.
I think this issue has been discussed before, but in a slightly different context. The question in my mind is: Is there any possible harm, damage, or negative consequences that could result from a preparer filing an extension without the client's explicit permission?
Generally, I think the answer is no.
Someone might be able to come up with a hypothetical scenario in which it might not be in the client's best interest to file an extension. When it comes to tax law, I don't like to use the words always or never. Every rule could potentially have an exception.
But in the vast majority of cases, I can't see any downside to filing an extension.
You certainly can't file the return, because you don't have a signature on the Form 8879.
Even if the client had not mailed payment, or if you weren't sure, the extension still has the effect of preventing a late filing penalty.
Filing a tax return without the client's authorization is a serious matter. But an extension is definitely not a tax return. So I really don't see a problem.
If you have an established, ongoing relationship with the client, some might even argue that the failure to file an extension could be viewed as negligence in this context.
BMKBurton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process. -
Hi Burton - the client is a grouchy old bat who yelled at me when I called to remind her about the forms. I'm going to call again today and probably fire her. She's already mad because her energy efficient HVAC was paid 100% with insurance proceeds and ALL of her friends are getting that credit and the salesman TOLD her she would get that credit and just who do I think I am????!
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Well, the old bat sent my payment today but no 8879 forms.Comment
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I never send in a return without a signed 8879 in my hand. I put clients onto extension if they don't get it to be by the due date.MichaelComment
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I also never efile without the 8879 forms.
It's whether to file the extension or not after they've already sent in the tax payment with the form 1040-V that was sort of confusing me.Comment
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I would file the extension just to be safe. The late filing fee is based on what she owes and if she paid with the voucher she should owe nothing, however if the payment would somehow get lost / not made you're covered.Comment
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Thanks Jesse. I'll do that
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And in my opinion, she's right about the credit, but may not like the full answer.Originally posted by BHoffman View PostHi Burton - the client is a grouchy old bat who yelled at me when I called to remind her about the forms. I'm going to call again today and probably fire her. She's already mad because her energy efficient HVAC was paid 100% with insurance proceeds and ALL of her friends are getting that credit and the salesman TOLD her she would get that credit and just who do I think I am????!
Insurance reimburses you for the loss. There's no requirement, from the IRS perspective, that the funds be used to restore the damage - repair cost is merely a convenient way to calculate the decrease in FMV.
However, if the reimbursement is enough to install the fancy-schmancy energy efficient HVAC, there's an issue of a taxable gain on the reimbursement. Either way, I believe the fact that insurance proceeds were used doesn't affect the availability of the energy credit.Comment
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I'm interested! Where would I report the insurance proceeds? Line 21? What if the insurance company paid the HVAC contractor directly?Originally posted by Gary2 View PostComment
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Start with form 4684, then Sch. D or 4797, as appropriate.Originally posted by BHoffman View PostComment
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OK. What if the insurance company paid the HVAC contractor directly? Would that matter?Comment
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Hmm, good question. Pub. 547 says that if your reimbursement is in the form of replacement property (as opposed to cash), you generally defer the gain, keeping the original basis. But if it's cash, the new basis is reduced. So I'm not sure what effect it would have.Originally posted by BHoffman View PostComment
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So frustrating....appreciate your comments and hope we can talk more about this.
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Engagement Letters
I have a little different question:
I have a client that has sent me payment and the signed efile forms but did not sign my engagement letter. Rule for myself is to never efile the return until my engagement letter is signed. Can I hold off on filing the return even though I do have payment and the efile signatures?
Semi- New Client in that I was paid last year to check a tax return prepared by someone else. They went to the same person again but had me redo the return when found mistakes... again.
I mailed the return with efile docs and my engagement letter to be signed. They did not sign the engagement letter. Had everything marked where to sign. I can not get a hold of them to talk on the phone for a few days.
DanyComment
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