Fee for Extensions

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#1
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Would you charge pain in the neck/"high maintenance" clients for 1065/1120s extensions?

If so, how much?
 

#2
ATSMAN  
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It depends on the situation. I have about 4 or 5 1065 clients that routinely request extensions because their bookkeepers are extremely slow. One goes right up to the deadline. I charge a flat $100 because I have to make a quick calculation of the amounts to be paid with extension, plus deal with the usual prodding to get them going for the final return!

I had one PIA client that I charged an hourly rate but that was not enough for my aggravation so I finally cut him loose :roll:
 

#3
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If I have to file extensions, it is 30 minutes of my tax rate per extension even if it takes me 5 minutes to prepare each extension. I do not e-file them either, learned from mistakes on that front and now only mail via Certified Mail.
 

#4
smtcpa  
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Depends on if there is tax due, especially at the state level. In Colorado, there is no state taxes on these entities. In that case, it takes less than a minute so I don't know why I'd charge them. In most years (I am ahead of the game for a change this year) I want extensions. Hell, I'd normally pay my clients to extend them. But if state tax is due and I actually have the capacity to get them done but they don't have their books to me, I'd charge them my tax season rate.
 

#5
ATSMAN  
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CornerstoneCPA wrote:If I have to file extensions, it is 30 minutes of my tax rate per extension even if it takes me 5 minutes to prepare each extension. I do not e-file them either, learned from mistakes on that front and now only mail via Certified Mail.


Just curious what problem you had with e-filing extensions? I don't recall filing a paper extension in the last 4 or 5 years!
 

#6
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ATSMAN wrote:
CornerstoneCPA wrote:If I have to file extensions, it is 30 minutes of my tax rate per extension even if it takes me 5 minutes to prepare each extension. I do not e-file them either, learned from mistakes on that front and now only mail via Certified Mail.


Just curious what problem you had with e-filing extensions? I don't recall filing a paper extension in the last 4 or 5 years!


Have had a couple of issues with UT transmitting extensions incorrectly, and IRS not accepting. At same time, I have had issues with IRS claiming extensions were not in the Certified mail package, when they were. I find it much easier to resolve extension issues with Certified Mail receipts than by providing eFile information from UT.
 

#7
ATSMAN  
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Have had a couple of issues with UT transmitting extensions incorrectly, and IRS not accepting.


If I had this issue with my tax software transmitting incorrectly, I would make them pay for any penalty and interest :twisted:
 

#8
smtcpa  
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Except for one fateful year with Lacerte, I have been using UT for 15 years. I've never had a problem with extensions in UT. When the IRS claimed they did not receive it, I sent the efile acknowledgment and the issue was solved.

CornerstoneCPA wrote:Have had a couple of issues with UT transmitting extensions incorrectly, and IRS not accepting. At same time, I have had issues with IRS claiming extensions were not in the Certified mail package, when they were. I find it much easier to resolve extension issues with Certified Mail receipts than by providing eFile information from UT.
 

#9
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CornerstoneCPA wrote:
ATSMAN wrote:
CornerstoneCPA wrote:If I have to file extensions, it is 30 minutes of my tax rate per extension even if it takes me 5 minutes to prepare each extension. I do not e-file them either, learned from mistakes on that front and now only mail via Certified Mail.


Just curious what problem you had with e-filing extensions? I don't recall filing a paper extension in the last 4 or 5 years!


Have had a couple of issues with UT transmitting extensions incorrectly, and IRS not accepting. At same time, I have had issues with IRS claiming extensions were not in the Certified mail package, when they were. I find it much easier to resolve extension issues with Certified Mail receipts than by providing eFile information from UT.


I had a similar experience 3 times with UT.

1) extensions were created, posted to File Cabinet, and submitted. Each one was also logged as extended (user-defined status). This is kind of a one-click process we did in batches. About 1/3 never had an electronic file made even though they posted to FC and the status was updated. There were no error messages.

2) We had another year where they showed as transmitted but never went through. UT said it was a failed transmission due to our high volume.

3) The last year that I e-filed them they were all accepted and everything looked fine. We got about 50 - 60 notices for a missing extension. The e-file confirmations resolved it but we lost incredible amounts of time.

Now I efile them AND mail certified copies in. No issues since I started that.
 

#10
ATSMAN  
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Now I efile them AND mail certified copies in. No issues since I started that.


But IRS says that if you e-file a form DO NOT send a paper copy :ugeek:

If UT has an issue with e-filing extensions, is it for certain types of returns or system wide?

Years back I had an issue in a lawsuit against me that I did not file the extension on time, causing taxpayer additional interest and penalties. I presented the court with the e-file acknowledgement from my system that the extension was accepted before deadline and that issue got thrown out of court. Had I paper filed, my certified mail receipt may not have had the same weight as an IRS ack.
 

#11
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ATSMAN wrote:
Now I efile them AND mail certified copies in. No issues since I started that.


But IRS says that if you e-file a form DO NOT send a paper copy :ugeek:

If UT has an issue with e-filing extensions, is it for certain types of returns or system wide?

Years back I had an issue in a lawsuit against me that I did not file the extension on time, causing taxpayer additional interest and penalties. I presented the court with the e-file acknowledgement from my system that the extension was accepted before deadline and that issue got thrown out of court. Had I paper filed, my certified mail receipt may not have had the same weight as an IRS ack.


Until there is a negative consequence I will do both.

There is a IRS authority I have had to use talking about certified mail being prima facia evidence of whatever was mailed was timely. I had to quote that to an unruly agent who was trying to argue that anything (or nothing) could have been in that envelope.

There may be a time where e-filing is the only legitimate option.

We have discovered with UT two things caused problems.

1) two different employees transmitting st the same time. That usually isn’t an issue except right close to a deadline where submitting can take 10 minutes or so.

2) batch extension creation would fail (but without an error) anytime we had a state that needed a PRP (pay per use). This is true even though during the extension process we select to generate federal files only. I’ve talked to UT and they are aware of the problem but don’t want to fix it. They prefer to encourage us to buy all of our PRPs at the beginning of the year to avoid the problem, and then we can call and have charges removed for any return not filed. No thank you.
 

#12
jon  
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I have used UT for 20 years and have never had as problem - and I cannot even remember when the last paper extension I filed.
 

#13
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I have never had the IRS argue against a certified mailing receipt. I make notes on the mailing label of what it contains, and there is enough precedence on the subject I am not worried about it in court or with IRS unless the law changes. It is always the first thing agents ask for when I say something was mailed but they do not have it, or have it recorded as being late. My method has been fail proof so far, and I have little desire to do e-filing of extensions and certain other forms at this point based on prior hassle.

I have even gotten into habit of including the Extension and Certified Receipt as an attachment when filing extended returns. Have not had a single issue since I started doing that.
 

#14
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ATSMAN wrote:It depends on the situation. I have about 4 or 5 1065 clients that routinely request extensions because their bookkeepers are extremely slow. One goes right up to the deadline. I charge a flat $100 because I have to make a quick calculation of the amounts to be paid with extension, plus deal with the usual prodding to get them going for the final return!

I had one PIA client that I charged an hourly rate but that was not enough for my aggravation so I finally cut him loose :roll:


We have a guy who bulk efiles extensions for all the partnerships and S corps (that need extending) in a couple of hours tops. 1065 returns don't have tax and 1120s don't unless they sell something with built-in gain. So extensions are extremely easy. Individuals and trusts re obviously more difficult.
 

#15
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We E File all extensions that are no money due. NEVER had a problem.

We send PDF of the extension to the client with money due. THEY mail the extension.

I make it clear to them, the check MUST clear by the 16th as proof. (Yes, I lie to them).

I recommend certified to them. I dont charge for this. A small premium is added to the bill. so a $700 1040, is now $750 etc.
 

#16
smtcpa  
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Why would you not e-file the balance due extensions? Of all the ones I would e-file, those are the top candidates.

southparkcpa wrote:We E File all extensions that are no money due. NEVER had a problem.

We send PDF of the extension to the client with money due. THEY mail the extension.

I make it clear to them, the check MUST clear by the 16th as proof. (Yes, I lie to them).

I recommend certified to them. I dont charge for this. A small premium is added to the bill. so a $700 1040, is now $750 etc.
 

#17
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We do not e-file NC extensions with payment due because we have had to spend too much time convincing NCDOR that client paid timely. NCDOR is a complete shambles when it comes to making online payments. We give clients the option with the fed extension.
 

#18
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smtcpa wrote:Why would you not e-file the balance due extensions? Of all the ones I would e-file, those are the top candidates.

southparkcpa wrote:We E File all extensions that are no money due. NEVER had a problem.

We send PDF of the extension to the client with money due. THEY mail the extension.

I make it clear to them, the check MUST clear by the 16th as proof. (Yes, I lie to them).

I recommend certified to them. I dont charge for this. A small premium is added to the bill. so a $700 1040, is now $750 etc.


I don’t want the payment drafted.... something about that bothers me but yes I see your point.

Most of my clients don’t want the payment drafted. are you e filing extensions and then the client pays after?
 

#19
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But to answer the original question, I charge $80 per extension, more if multiple states are required or balance is due. Most clients do not complain about it, some even thank me for addressing it for them, but I will be reconsidering future services of clients that do complain about paying a fee for me to file extensions. I "waived" one fee, but will add some or all of it back into the final tax prep invoice. In the past, the responsibility was shifted to clients for filing extensions if they did not want to pay the fee, but that created more hassle, such as them claiming it was mailed but zero proof of it.

One question I do have: if you do charge for extensions, do you invoice at time of extensions or build into final tax prep fee? I have some clients that do not like seeing separate extension fees, so I build it into their final tax prep fee.
 

#20
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CornerstoneCPA wrote:One question I do have: if you do charge for extensions, do you invoice at time of extensions or build into final tax prep fee? I have some clients that do not like seeing separate extension fees, so I build it into their final tax prep fee.


Generally I build it into the final tax prep fee, but it's consistent with my overall billing ethos. I generally only give one total rather than identify that Form 4868 added $X to the prep fee. Honestly, I would only show a separate fee for the extension if I wanted to alter client behavior.

Because I don't generally do progress billing for tax returns, I invoice at completion of the tax return. (Plus, I generally won't send an invoice under $100 as a general rule.)
 

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