Extensions - Whose Decision Is It

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#1
CP Hay  
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When it comes to filing extensions, whether close to the due date or not, do you typically ask the taxpayer if they want to extend or do you just file and tell them?
 

#2
CathysTaxes  
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I ask. Especially since since I charge for extensions.
Cathy
CathysTaxes
 

#3
Miami88  
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It's in my engagement letter that if I don't have all their info or won't be able to complete it in time, I will automatically file an extension. If they haven't signed the engagement letter, I don't track people down and ask, I only file if they contact me. Otherwise I assume they have it taken care of, either by themselves or another preparer.

I do occasionally reach out to people and ask, like some elderly clients or the flighty ones (that are otherwise great).
 

#4
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This year, I am charging a fee to file an extension. No payment = no extension. I hope it will be as simple as that.
 

#5
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This is in my engagement letters but if they have not signed, I am not inclined to extend. I warn them in advance that they need to sign for me to extend.

For various tax code purposes, continuously changing circumstances, and the high volume of tax returns prepared by this Firm, all Clients should expect to have extensions filed unless their tax returns are clearly prepared and filed prior to the original due dates but we may identify reasonable cause to still file extensions, even if your tax returns are ultimately expected to be filed by their original due date. By signing this Engagement, you agree to have extensions filed on your behalf with anticipated revenue agencies, without regard for when you may have supplied all required tax documents.


I then proceed into how extensions are a non-delegable duty which is my CYA if they get pissed about me not extending them because of their lack of attentiveness.
 

#6
Frankly  
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My position is that either party may call for an extension, and neither party may refuse.
 

#7
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I extend all business returns without notification. And I need to update my engagement letters as such.

1040s, a client may ask for an extension, or I make a judgement call. Regardless, the client is aware the extension is going to be filed before we file it.
 

#8
smtcpa  
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If we have any documents, we will extend without requesting permission. If I haven't heard back from them, we definitely get their approval, in writing.
 

#9
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I have a Google form that is sent out to all clients so they can check a box to agree with my terms before I will begin work on their tax returns. They also must check a box that they are OK with an extension - so that takes care of that.

I have a friend that does taxes that has filed extensions for former clients that have not engaged yet for the year without asking them. There has been the rare occasion where the client had no intent on coming back to him for that year and was upset to hear when their new preparer indicated that an extension was already filed.

One such client was quite livid because the new preparer made a stink about it, saying that they now couldn't use a direct debit and that my friend had no right to do that. So my friend is a bit more careful about reaching out first now depending on the client.

I think it would maybe be a good idea to put it in the engagement letter in regards to an extension in the FOLLOWING year - but that gets a little weird with "when the engagement ends" language and/or if you fire a client. So nah.
 

#10
CP Hay  
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"now couldn't use a direct debit"

What do you mean by that?
 

#11
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CP Hay wrote:"now couldn't use a direct debit"

What do you mean by that?


Most software allows for a direct debit to be made for the extension payment. Filing an extension precludes that. If a payment is due and the old accountant filed a zero extension, I daresay one might question whether or not a good-faith estimate of tax liability was made.
 

#12
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Since corporate is coming up, here is what we do:

“Spool” an extension for every client in our system, which is everyone except folks that specifically told us they aren’t coming back.

On Monday I’m sending in the extension for every client logged in and every client I have been in communication with.

About 10:00 at night on the 15th I send in all the rest. If someone complains I filed an extension so their new person couldn’t ill explain it was 2 hours before the deadline.

I’ve only received that complaint once and it was on a 1040. Actually that’s the only complaint. I responded it says like your new person was about to drop the ball. She wasn’t trying to pay anything.
 

#13
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SumwunLost wrote:one might question whether or not a good-faith estimate of tax liability was made.


In most cases, if we could make a good faith estimate of tax liability then an extension would not be required.
 

#14
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CornerstoneCPA wrote:
SumwunLost wrote:one might question whether or not a good-faith estimate of tax liability was made.


In most cases, if we could make a good faith estimate of tax liability then an extension would not be required.


I've also noticed that when printing batch extensions our software (and prior software) used all zeroes. We could only create an extension with real tax, withholding, and payment figures if we did them one at a time. So we only do that if we are making payments, which are the only ones we have a real estimate of anyway.
 

#15
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RazorbackCPA wrote:I've also noticed that when printing batch extensions our software (and prior software) used all zeroes. We could only create an extension with real tax, withholding, and payment figures if we did them one at a time. So we only do that if we are making payments, which are the only ones we have a real estimate of anyway.


Precisely. It's unrealistic for extensions to contain a so-called "good faith estimate of taxes due." We'd prepare and file the returns if we had that capability. It's just yet another example of how clueless the government is about reality vs. their fantasy world.
 

#16
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I'd be worried that an extension containing all zeros would be invalid, as a valid extension should contain a good faith estimate of the tax liability.

If I don't have any numbers from the client or any docs, I use last year's data for the extension, as that's the best available given the circumstances. I'll then instruct the client to pay an estimate for the extension via Direct Pay if they feel they should. Their guess is as good as mine. :)
 

#17
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I've been mulling this over the last few days. Has anyone else noticed clients getting 1099s etc much later? I used to be against moving the filing date out but I do have to wonder if the April deadline should be moved to June 15th and March moved to May 15th.

Then require payment in April as normal but have more flexible rules on payment of penalty and interest (yes, interest). Perhaps the 80% rule we had for a year or two. Perhaps take capital gains out of the calculation. Those familiar with the UK system will, perhaps, see a passing resemblance.

I think you can make a good-faith estimate but be unable to finish up a return so that it is acceptable to the IRS computer. For instance, what if one is waiting on the HSA forms but has established that the client only used the account to pay eligible medical expenses? You know there is no impact on the liability, but you need the form to save the client from a needless notice.
 

#18
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A consolidated 1099 package needs to be furnished to the taxpayer or postmarked by February 15th. If the brokerage house files for an extension, the deadline is March 15th.

I don't view 1099s as the issue. They're easy to input and review. Rather clients with complex transactions or PTE investments that don't turn in their documents until after March 15th are my pain point.

IMO, pushing the deadline back doesn't fix that issue. It just gives procrastinating clients more time to procrastinate.
 

#19
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SumwunLost wrote:I think you can make a good-faith estimate but be unable to finish up a return so that it is acceptable to the IRS computer. For instance, what if one is waiting on the HSA forms but has established that the client only used the account to pay eligible medical expenses? You know there is no impact on the liability, but you need the form to save the client from a needless notice.


Good faith estimate based on the data available to you at the time. Doesn't need to be perfect, or fretted over.
 

#20
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ManVsTax wrote:I'd be worried that an extension containing all zeros would be invalid, as a valid extension should contain a good faith estimate of the tax liability.

If I don't have any numbers from the client or any docs, I use last year's data for the extension, as that's the best available given the circumstances. I'll then instruct the client to pay an estimate for the extension via Direct Pay if they feel they should. Their guess is as good as mine. :)


I used to be worried, but we've filed zero extensions for a large % of our 1040 extensions for 15+ years. I just don't have the time to manually fill in numbers on that many returns. Heck, I've got some that we say zero on all of the lines except payment - $60,000 (thinking of a builder who extends every year). That isn't a calculation but a wild guess he makes.

I remember the days of manually filling in paper extensions at a big desk with the other CPAs and then mailing them off by 6:00. The good ole days, long before the 2nd extension requirement was abolished.
 

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