Deferred EF payments?

[Black Bart]

Client has extension and owes federal tax. He wants:

1. To file electronically now and get it over with.
2. Wants to pay by electronic debit but doesn't want it to hit the bank until October 15th (won't have the money until then).

Back in tax season I could have IRS debit his bank account for any date up and including April 15th, but what about after that date? My software asks for a date and will let me enter 10-15, but would IRS accept that or simply disregard it and debit the bank immediately (or within 30 days or so)?

Since the extension is not (officially) an extension of time to pay, I'm sort of thinking they would debit now and charge an insufficient funds fee if it "bounces." Or else send a CP "pay up" notice in about a month along with a blank 9465.

I called IRS-EF; they don't have a clue (checked their reg books and could only find 4-15 debits info).

Have you ever specified a debit date later than April 15th and if so, what happened?

[appelman]

Haven't had the experience, but wouldn't recommend it.

October 15 has no significance regarding late payment penalties and interest. They track from April 18 (this year) until payment is made. I would suggest that if he files now, he send a check when he has the money. (He may get a bill in the meanwhile.)

[S T]

Personally

I don't use Electronic Debit for payments, - I probably have used it once on an electronic file.

I would electronically file the return with either a nominal $ 100 payment or no payment, and have the return filed - t/p will receive a notice for balance due, at which time t/p can call to arrange the balance due payment for 10/15 -

Otherwise you just wait until close to Oct 15, 2011 date to file and pay

Penalties and interest of course accrue from 4/18/11 for year 2010

Sandy

[FEDUKE404]

Prior experience with late debits

I have encountered this issue before.

Most (all?) of my clients with a balance due used a bank debit date of somewhere around April 11th, even though most of the tax returns were efiled prior to that date....some in early March. Virtually everyone with a balance due (federal and/or state) chose this method. Why send money to the government before you need to do so?? It works quite well and also no one ever "forgets" to send in their payments.

For returns with a balance due that are efiled AFTER 04/18 I can not select a "future" bank debit date. The software flag is "If you are filing your return after April 18th, the withdrawal date cannot be later than today's date."

I assume that is an IRS rule?

It seems the only options for your client are to efile, and send a separate check/payment voucher whenever he gets the money, OR to somehow find the funds and efile and debit now.

Either way, he is going to get whacked with penalties/interest for not having everything paid by April 18th.

FE

[Lion]

Eftps ?

I haven't tried it for clients. But, I know you can set up EFTPS payments up to a year from your set-up date. If he really wants to just set it and forget it, look into EFTPS. (I agree it won't change him getting a bill for P&I.)

[JohnH]

I like Lion's solution if he needs to gain some time before paying. He can sign up for EFTPS and control exactly when the debit takes place. Better & safer to keep the payment process under his control than surrender it to the IRS.

He can estimate that he will pay slightly less than 1% per month in combined FTP penalty and interest, calculated from Apr 18 to the date he makes the payment. All in all not a bad deal, especially if he doesn't have the money and/or can't borrow it at 12% APR or less.

If he files now without payment, it will take IRS about a month to send him a bill. When the bill arrives, he can then call them and request a three-month deferral of the payment date without going through the hassles of a formal payment arrangement. This type of request is routinely granted if the taxpayer is otherwise in compliance.

The deferral won't affect the FTP penalty and interest amounts - they will continue to accrue until he pays up. But it will keep him out of the ACS and the aggravation of additional collections letters. And at the end of the three months, if his plans to come up with the money don't materialize, he still has the option of setting up an installment agreement. He should just be sure to hit the agreed-upon dates and not drag it out without any communication.

[FEDUKE404]

Eftps

While I concur the EFTPS route may be easier, for a situation such as this one I'm not sure that is the best route. Somewhat analogous to swatting a mosquito with a sledge hammer.

IIRC, setting up an EFTPS account is somewhat involved, to possibly include having some password stuff exchanged via snail mail.

Computers and online security are better now, but in the past I had EFTPS accounts set up for my own joint return and for my parent's. It has been well over 15 years since any payments were made from either account, and I still receive "letters" from EFTPS including those addressed to my parents who died around 2000.

The simplest approach here may be just to file/efile the return and wait for the inevitable stuff to impact the aerator for late payment. Whether the actual return is filed (without any payment) today or on October 14th may well be a moot point anyway?

The "best" decision is primarily a personal one for your client, depending upon cash flow and other financial issues. Things would be greatly simplified all around if the client could "find" the money (short-term loan?), pay with efiling, and get this all behind him. Well, except for the eventual follow-up letter from the IRS telling him he owed a bit more.....

FE

[Black Bart]

Thanx folks!

Good replies, all.

Let me clarify a bit:
a) Penalties and interest are not an issue -- he understands/accepts that.
b) This situation begs the question, "Why not just forget it 'til 10-15 and file then?" I would, but there's a big AR refund (needed jiffy-quick) coming and I have to file fed EF to get it right away. That's ordinarily not the case -- AR no longer goes "piggyback" but there's currently a Little Rock glitch processing state-only/stand-alone returns. It might go through solo but I can't chance it since their programming resolution frequently takes a month.

About the software -- I think FE's ("no withdrawal dates after 4-18") is probably right; his assumption that it's an IRS rule makes sense looked at from their viewpoint. My ATX is likely just unknowing (sure do miss that old, Cadillacy, "fool-proof" Lacerte).

There's no worthwhile money in this and the client can't handle paperwork/IRS calls, so I don't want to set up 9465/EFTPS. John's 3-month "formal deferral" deal sounds okay (except for hassles of POA/conference call/getting involved); I didn't know about that -- just always sent it off without money, first bill arrives in 30 days, reminder 30 days later, pay-up notice 30 days after that. Problem is, "levy" letters start after 90 days and we've got 4 1/2 months to go. While nothing's actually done for about six months, they give clients a heart attack.

Well, nothing to do I guess except tell client to file paper AR and wait a month for his dough (even if he is on starvation/under eviction/over a barrel).

Interesting lesson for me though -- I think I've learned that I can't override the whole IRS collections process by simply keying-in "October 15th."

[FEDUKE404]

AR issues

Interesting additional info on the state return relevance.

While I'm not familiar with how AR handles things, it sounds as if efiling AR only as soon as possible would not be a good option for your client?

Also, FWIW: Have you considered paper-filing the state return and just keeping the fed (efiile or paper) on ice for a while??

FE

[JohnH]

Good replies, all.

Let me clarify a bit:
a) Penalties and interest are not an issue -- he understands/accepts that.
b) This situation begs the question, "Why not just forget it 'til 10-15 and file then?" I would, but there's a big AR refund (needed jiffy-quick) coming and I have to file fed EF to get it right away. That's ordinarily not the case -- AR no longer goes "piggyback" but there's currently a Little Rock glitch processing state-only/stand-alone returns. It might go through solo but I can't chance it since their programming resolution frequently takes a month.

About the software -- I think FE's ("no withdrawal dates after 4-18") is probably right; his assumption that it's an IRS rule makes sense looked at from their viewpoint. My ATX is likely just unknowing (sure do miss that old, Cadillacy, "fool-proof" Lacerte).

There's no worthwhile money in this and the client can't handle paperwork/IRS calls, so I don't want to set up 9465/EFTPS. John's 3-month "formal deferral" deal sounds okay (except for hassles of POA/conference call/getting involved); I didn't know about that -- just always sent it off without money, first bill arrives in 30 days, reminder 30 days later, pay-up notice 30 days after that. Problem is, "levy" letters start after 90 days and we've got 4 1/2 months to go. While nothing's actually done for about six months, they give clients a heart attack.

Well, nothing to do I guess except tell client to file paper AR and wait a month for his dough (even if he is on starvation/under eviction/over a barrel).

Interesting lesson for me though -- I think I've learned that I can't override the whole IRS collections process by simply keying-in "October 15th."

Understandable situation Bart. Now that you've clarified it a bit more, here's what may be your best bet. After you e-file, wait for the first letter from IRS. Write a simple letter for him to sign (not from you - just do a letterhead for him and let him sign it). The letter should just say "I can't pay right now and am asking for another 90 days to come up with the money, etc" Attach the IRS letter to his letter and let him send it all off. I think including a small token payment accompanying this letter might be helpful, but not essential.

I'm betting IRS will respond by giving him the 90 days. (although while I'm writing the letter for him I'd give a conference call a shot just for the fun of it). If his next reply from IRS doesn't give the 90 days, then you'll probably have to either make the call or send the 9465 at that time in order to get him past 10/15/11.

This may not be wasted effort, since he's very lilkely not to make the 10/15/11 date for payment anyhow, based on yoiur description of his financial situation. May as well develop a plan now rather than deal with him when he's in full panic mode, calling your home and office at midnight on 10/14/11.

[MAJ]

Panic... Now who does that these days!!??

Except the wife!! 8-)

Hey -- Loved this story. Good content and some 'fun'. At least not at my expense!

You could just put the 9465 in there and request additional time to pay. Be precise and tell them no payment until 10/15/2011 at the earliest and explain the situation in a letter attached now. If things get better - great. If they don't then your client (and you) are always up front with the IRS. I'm sure they are adapting to the new Financial Era just as we all are - "In Everyone we Owe" - That seems to be going around these days.

Listed below are the 3 official ways to pay (really two in my eyes). Why trade a lower set interest rate for a potential out of control one if things get rougher.

While on the topic! I am vey happy to say - I am officially credit card dept free. Only 12 years later than I anticipated.. You want to talk about panic!?? Why is there not extra money!?? 8-(



Official El Quoto
1. Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at http:www.IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 60 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

2. Installment Agreement You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, Installment Agreement Request, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on http.www.IRS.gov.

3. Pay by Credit or Debit Card To pay your Federal taxes by credit or debit card, you can use all major cards (American Express, Discover, MasterCard, or Visa). For information on paying your taxes electronically, including by credit or debit card, go to www.irs.gov/e-pay and contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. Do not add the convenience fee or flat fee to your tax payment.
OFFICIAL END of EL QUOTO

I am vey happy to say - I am officially credit card dept free. Only 12 years later than I anticipated.. You want to talk about panic!??