Extension Fun - How to Answer These Specifically?

First we tell clients that "if we don't have all of your data and information within 4 weeks to any deadline, we will have to file an extension."

Then we go on to tell them all the "if we do not have all of your data within 2 weeks to the deadline we will not have time to compute the amount of your extension."

Regardless, like some of yours I'm sure, clients are just coming to us now - with 3 business days to the deadline.

We now tell them, "an extension...time to file... not time to pay - yada yada yada... and

"you did not give us enough time to compute an estimated tax balance for you, if you wish to pay in an estimated amount with your extension please let us know how much you want to pay and we will create an extension voucher for you".

Many of them are coming back this year with responses like:

"I do not understand how I am supposed to calculate if I will owe or not. If you have a suggestion on how I do that, then I’ll do it. I am not a tax preparer so I have no idea how I am to figure out what I would owe or receive. I never filed an extension and this is new to me." "Is there a way I can estimate it myself? Any resources you are aware of that I can use?"

Anyone have a canned answer or polite way to deal with this?

It would not be surprising to get pushback for suggesting that the client figure out for themselves how much they might owe.

Two options: file the extension with no payment and hope for the best. Or, extend with a payment equal to whatever they owed last year, maybe add 50% cushion.

Unfortunately there's no easy solution for this...at least none that I'm aware of.

I'd look at it on a client by client basis. Historically what have been the facts? Does the client usually get a refund? Usually owe with extension/return? How much? etc

If the client historically owes, I'd encourage them to make a payment, and would do everything possible (possible within 3 business days) to get a rough estimate of what that might be. And...I'd make the client very aware that this is a rough estimate, as we're three business days away from the deadline and you're not my only client... Don't be surprised if you owe again with the return and get a P&I letter from the IRS and state DOR after filing... Very polite and professional of course.

If they make estimated tax payments, have them send in the first two amounts plus some on the extension and then apply any future refund to the estimates. For IRS you are only looking at about 1% per month cost of being short. For California, extension is not valid unless enough is paid so it can be 5% per month if you are short.

For California, extension is not valid unless enough is paid so it can be 5% per month if you are short.

Can you please provide a cite for this? My understanding is that CA extensions are valid regardless of whether the amount due is paid (CA doesn't even allow for the electronic filing of an extension for personal income tax purposes unless the amount due is paid by direct debit).

While an extension will not prevent the assessment of the failure to pay penalty, it may help with respect to the failure to file penalty.

My bad, you are correct. But California late payment penalty is similar to IRS late file penalty - 5%/ month up to 25%!