Form 4868 Payment

[sandigi]

Yes

Client knows that they will have a balance due. They are still paying from last year. form 4868 asks for estimate of total tax liability, I put 5000 (I don't want to put 0 knowing there will be)... then asks for amount paying with 4868... Client can't pay anything with 4868 so I have 0 in that field. Client knows about the penalties/interest if nothing is paid.

Has anyone experienced this? Can I efile?

Yes you can efile the Form 4868. Why not?

[JohnH]

That's pretty handy, especially for a last-minute inquiry.

[TaxGuyBill]

The IRS "Direct Pay" website now has the option that it will automatically file the extension if a taxpayer makes a payment through that. If I don't have enough information from the taxpayer (or if they ask me a day or two before the deadline), I've been telling them to make a payment there (even if they just want to pay $1, just to file the extension).

http://www.irs.gov/Payments/Direct-Pay

[MBTS]

Thanks, JohnH

[JohnH]

I don't know if you can e-fling it or not.
Someone else will have to answer that.

But you are smart to show that it is anticipated that there willl be tax due. I prefer to estimate high - there is no downside to a high estimate. The fact they they are paying nothing is irrelevant - the extension will be valid if filed on time. It doesn't matter that they already have a balance due form the prior year, or that they are on an installment plan. Each year stands on its own with repect to the extension. All you have to do is file it with a reasonable estimate of tax due.

Now when they file the return (with or without payment) and don't pay when they get a bill for the P&I (and possibly more tax due), then they will find the IRS voiding the installment agreement. But nothing happens with respect to the installment agreement until the actual return is filed.

[MBTS]

Client knows that they will have a balance due. They are still paying from last year. form 4868 asks for estimate of total tax liability, I put 5000 (I don't want to put 0 knowing there will be)... then asks for amount paying with 4868... Client can't pay anything with 4868 so I have 0 in that field. Client knows about the penalties/interest if nothing is paid.

Has anyone experienced this? Can I efile?

[Burke]

Another tip: You can set it up in that section to have any PM coming TO you to also show up in your email account. That way, you see it there and don't always have to look to that little box when you are in this Forum.

[sandigi]

Got it!

Go to top of the Forum page on the red bar where it says "Welcome, sandigi." Next to it is a black box that says "Notifications." Click on that and a whole new world will open to you. It really should be a little more user-friendly.

Thank you, Burke. I clicked and looked and can't wait to explore the new world a bit later.

[Burke]

. I don't know how to PM, so will try here on the forum.

Go to top of the Forum page on the red bar where it says "Welcome, sandigi." Next to it is a black box that says "Notifications." Click on that and a whole new world will open to you. It really should be a little more user-friendly.

[Burke]

When in doubt, read the instructions.
"Note. If you e-file Form 4868 and mail a check or money order to the IRS for payment, use a completed paper Form 4868 as a voucher. "
Bottom right of page 3 of PDF. http://www.irs.gov/pub/irs-pdf/f4868.pdf

Consarn it, I READ those instructions and didn't see it! I told you it was a dumb question. I need a drink.

[JohnH]

In the rush we are jumping all over the place on this forum, but also take a look at my reply on the main thread. I gave you some more info on a better way to enter Roth distributions and other special situations in Drake. It might be useful if you find that he had a loss on the Roth IRA, as Burke suggested over on that thread.

[sandigi]

That did it!

Are you entering anything on line 2a of the input screen? I think it will carry to 16a if you do that. Assuming the distribution is original funds only (no earnings), then I think the entry on 2a should be -0-. If there are any earnings, they should go on 2a. I haven't done an early Roth withdrawal in several years, but I think the one I did handle was taken from a 1099-R which was incorrectly filled out.

Oh, John I appreciate you so much! I've played with that tax return for so long and overriden so much that I knew I had made a mess of it! Yes, I did put -0- on Screen 1099R line 2a and it was being dumped in with the pension $ on form 1040. I just now deleted the -0- and left 2a blank. Wahlah! Magic. It is now only on Form 1040 line 15a IRA distributions.

You are probably very busy and I THANK YOU from the bottom of my heart.

[JohnH]

Are you entering anything on line 2a of the input screen? I think it will carry to 16a if you do that. Assuming the distribution is original funds only (no earnings), then I think the entry on 2a should be -0-. If there are any earnings, they should go on 2a. I haven't done an early Roth withdrawal in several years, but I think the one I did handle was taken from a 1099-R which was incorrectly filled out.

[sandigi]

Great way to explain! Can you help me with 1099R in Drake?

I neither encourage nor discourage them form paying late payment penalties. I simply give them their options (ALL of their options), and let them make an intelligent choice given their circumstances.

I strongly encourage them to avoid a Late Filing penalty of 5% per month. But I also explain to them that the late payment penalty plus interest amounts to 3/4 of 1% per month (the equivalent of paying a 9% APR on the unpaid balance). Some choose not to pay that, while for others it's cheaper than any other means they have to borrow the money on short notice.

I find that most of them are perfectly capable of making rational financial decisions when given all the facts, especially if I don't scare the daylights out of them by shouting "PENALTY" when it's really just a way the IRS uses to boost the effective interest rate. As a tax pro I owe them the courtesy of giving them the whole picture. Once I explain that a non-deductible penalty is functionally the same thing as a non-deductible interest charge, they almost always understand that there is no practical difference between them, and that the sum of the two is simply a cost of borrowed money. From that point, it simply becomes a matter of deciding the easiest & least painful way to borrow.

I like your method of explaining the penalty. It is very clear.

I hope you can help me with another issue. Someone said you use Drake, and I should PM you on a problem I'm having with Roth Distribution. I don't know how to PM, so will try here on the forum. I have 1099R code T. Drake is throwing the $ on F1040 both lines 15a and 16a. What am I doing wrong?

[JohnH]

That sounds pretty illogical. . .kinda like sending in a no-payment tax return with a large balance due and then just waiting for the IRS to send you a (moderately increased!) invoice sometime in the future? ?

Do you routinely encourage your clients to face exposure to late payment penalties? ? ?

FE

I neither encourage nor discourage them form paying late payment penalties. I simply give them their options (ALL of their options), and let them make an intelligent choice given their circumstances.

I strongly encourage them to avoid a Late Filing penalty of 5% per month. But I also explain to them that the late payment penalty plus interest amounts to 3/4 of 1% per month (the equivalent of paying a 9% APR on the unpaid balance). Some choose not to pay that, while for others it's cheaper than any other means they have to borrow the money on short notice.

I find that most of them are perfectly capable of making rational financial decisions when given all the facts, especially if I don't scare the daylights out of them by shouting "PENALTY" when it's really just a way the IRS uses to boost the effective interest rate. As a tax pro I owe them the courtesy of giving them the whole picture. Once I explain that a non-deductible penalty is functionally the same thing as a non-deductible interest charge, they almost always understand that there is no practical difference between them, and that the sum of the two is simply a cost of borrowed money. From that point, it simply becomes a matter of deciding the easiest & least painful way to borrow.