Client out of town on business and will not be able to file his personal tax return by Oct 15th. I have prepared his taxes for a few year and he will be filing a Sch C for his business again and mostly likely will not owe any taxes for 2010.
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2nd extension
Was your client effected by Hurricane Irene or Lee on the east coast?
If not - then you're not entitled to an extra 2 weeks.Uncle Sam, CPA, EA. ARA, NTPI Fellow -
I had one of my clients call for her son. His lawyer told him to get another extension as they are going to court on the 19th for the divorce. I told her October 15th was the last deadline...no more extensions. Just told her lawyer was not up on tax information.
Linda, EAComment
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1) Is your client just out of town, or is he out of the country? That makes a difference.
2) If he doesn't owe anything, then a late-filed return won't cost him any penalties or interest. But if an audit later turns up additonal tax due, then the late-filing P&I would apply. That could easily happen with a Schedule C.
3) If he does owe, then having a valid extension means that the late-filing penalty doesn't kick in until now. So he's running the clock at 5% per month until it's filed, beginning Oct 15 rather than Apr 15. Initially, he's only out $50 per thousand owed, but it increases by the same amount each month it's late. For example, if he owes $2,000, is pretty sure the numbers are solid, and couldn't get it filed by the 15th, he MIGHT conclude that a $100 penalty is acceptable if his business trip is more important and allows him time to get it in by Nov 15. (Just a thought)
4) None of what I'm saying endorses or recommends filing late, but it might put it in perspective. It doesn't take into account the perceived higher audit risk of a late-filed return (which I think is a myth, BTW - probably dreamed up by tax preparers who feel vaguely squeamish about late-filed returns)
5) Whatever the case, I think it's important to let the client know he will be exposing himself to those penatlies as a result of HIS decisions. I'd put it in an email or a letter and attach to his copies of the return, just so it's clear how the late-filing came to be. If he's audited 2-3 years from now and comes up with additional tax due, having it documented in a CYA letter might save you some hassle with the client over who's responsible for all those penalties at that time.
6) BTW, the lawyer in Linda's situation may actually know the rules, but he's just tossing this out as a way to get the client to delay filing & literally buy some time. He might have come to the conclusion that a late filing penalty could be cheaper than full disclosure in court. He can't come right out and say it, so he just makes the suggestion and hopes for the right outcome. I'm not validating that as a strategy - just mentioning it as an alternate explanation for the "advice" he gave. I've seen lawyers do similar things for strategic & tactical reasons. After all, praticing law isn't so much about right & wrong as it is about moving the pieces around on the chess board.Last edited by JohnH; 10-11-2011, 08:55 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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No to Hurricane, No to out of the country
Ok, so if my client does not owe, then all he loses is he will need to file a paper return since e-filing closes mid night Oct 15th, am I correct?
He is traveling for his business within the U.S.
Yes, I plan to email him on all of this including the penalty if he does happen to owe.
Thanks everyoneComment
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We have till midnight the 17th this year; not that 2 more days matter on some.Originally posted by AZ-Tax View PostSueBabyComment
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Thats assuming Legecy efiling. MEF eligible returns can be filed for another 2 years for a 2010 return.Originally posted by SueBaby View Post
ChrisComment
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When you tell him about the penalties, be sure to mention all of them. With multiple penalties of varying amounts, plus interest charges, it's easy for clients to get confused. The notices don't do a very good job of explaining things to the average taxpayer, either.
Obviously, the big one is the monthly 5% Failure to File Penalty, which maxes out at 25%. That's the only one the extension takes care of.
There is also a Failure to Pay penalty of 1/2 of 1% per month and the possibility of an estimated tax penalty (depending upon the amount due and whether he has safe harbor protection). Then there is a modest interest charge (currently only 4% APR). Everything in this group dates back to Apr 15, regardless of whether the return is filed on time or not. They just continue running on a monthly basis until the tax is paid.
The smaller penalties and interest aren't a big deal in light of the monthly 5% FTF penalty, but worth mentioning. Occasionally someone with a valid extension will call me when they get their notice with some relatively light P&I and say "I thought you said there wouldn't be any penalties!" That's when I refer them back to the explanatory email and tell them to write the check, considering it all to be nothing more than a convenience fee. There's seldom a quesiton after that.Last edited by JohnH; 10-11-2011, 10:48 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Deadlines
Texas wildfires have 31 October deadlines, also.
Federal e-file remains open through 31 October, but anyone not located in one of those three federal disaster areas will be deemed late-filed after 17 October even though not rejected under legacy or MEF.
Many states are following federal guidelines. CT and NY have 31 October deadlines for Hurricane Irene and will still be accepting e-filed returns. IL will follow federal deadlines but says they won't accept e-files and require paper returns after 17 October. Your mileage may vary.Last edited by Lion; 10-11-2011, 11:26 AM.Comment
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Could be...
Aside from the disaster quasi-extension issues....
From the somewhat distant past, I seem to recall you could get an "automatic" extension, more or less no questions asked, until perhaps June/July and then if you needed the "extra" extension, you would then have to state on that separate request form the reasons for needing that extension. ALSO, the IRS would have to notify you that the "final" extension to Oct 15th had been granted.
Well, I remember Schedule G (income averaging) also......
FEComment
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Schedule G
Remembrances of the past - I always enjoyed trying to work that form and save a few tax dollars - clients always seemed to be impressed - use to use it as a "tool" to have the taxpayer involved when a new client. So many had never heard of it - so even if just
$ 100 that I could show that I saved the Client was elated. Of course in those years - no computers - just paper, pencil and calculator.
SandyComment
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Hurricane Irene extension
Lion -
What exactly is the procedure for efiling under Hurricane Irene extension.
My client is located in NJ and claims affected by Hurricane Irene.
He had filed 6-month automatic extension for his S-Corp and 1040
Is there a special Hurricane Extension form?
Or obtain some designated code number from IRS before filing the return?
Or simply file the return being located in the affected area?
Or simply attach a note saying the t/p was affected by the hurricane and therefore was unable to file the return on time.
ThanksComment
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You might find this useful.
"The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Oh right! That's back around the time we used a lot of schedule R's also.Originally posted by FEDUKE404 View PostAside from the disaster quasi-extension issues....
Well, I remember Schedule G (income averaging) also......
FEChEAr$,
Harlan Lunsford, EA n LAComment
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Sigh!Originally posted by S T View Post
And wet copiers.
oh, and before that, carbon paper!
now everybody all together now, sing.. "Those were the days." along with Archie and Edith.ChEAr$,
Harlan Lunsford, EA n LAComment
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