Problem with SEP IRA. Please help!!

So I finished a client return a week ago and informed him of the potential tax savings of a SEP contribution. I didn't hear back and last night I sent off a batch of returns, with his included in error (I forgot we were potentially waiting on the SEP).

I actually did not have a signed 8879 on file yet. It was just sent in error. And, of course he called me this morning requesting I extend so he can make a contribution in October.

Do we have any relief that would allow him to wait until October to make the SEP payment. I'd love to file an extension right now, but it will be rejected, obviously.

Am I correct that the extension has to be filed in order to get the extra 6 months? It seems a bit unjust but I believe that's the case, right?

Short of making the contribution today, anything else I can do?? Help!!

Or just confirm I'm screwed if you would .

Don't know if it will solve your problem, but you could always file a paper extension.

It's a good thought, I had as well. I don't know if it solves the problem either, but if we paper file the extension, amend the returns to include the SEP Contribution and pay the reduced amount of tax today, and make the SEP contribution in October, I suspect it will all go through just fine. Unless Taxpayer was ever audited. Exposure seems limited and while it's not a proper filing I wouldn't feel any heartburn as we sit here on April 17th, ready to file it that way were it not for essentially a clerical error...

Isn't this what a "superseding return" is for? https://www.cpajournal.com/2016/07/06/a ... n-do-over/

Nilodop, doesn't that only work if he can make the SEP contribution today?

Nilodop, doesn't that only work if he can make the SEP contribution today?

That's what I think as well, but I"m willing to listen...

For now, we're taking the rogue approach I noted above, documenting the hell out of it, hoping we're not audited and if for some reason we are, hoping we get an understanding auditor who will see we just made a mistake and did everything else the way it should have been done.

An extension should solve your problem. If you filed a return before 4/17/18, and thereafter, file a timely extension today (4/17/18), that extension is a valid extension. IMO, all that needs to happen is that a valid extension needs to be timely filed in accordance with the criteria set forth in Reg. Sec. 1.6081-4. I think this PTMA’s Situation #1 analysis is right:

https://www.irs.gov/pub/lanoa/pmta00765_7275.pdf

And I also think the conclusion in PLR 8336006 is flat out wrong, when it stated:

Once original return (Form 1120) required by Sec. 6012(a)(2) was filed, request for extension of time (Form 7004) to file that return was nullity; extension of time request won't quash filed return.

and

Having filed the required return, a request for an extension of time to file the same return is futile since the taxpayer has already filed a complete return. Inasmuch as the return has been filed, the Form 7004 does not act to quash the original return.

And Nilodop is quite right: The “amended” return that will be filed prior to 10/15/18 is technically a superseding return. I’d use a 1040X, however, just to avoid confusion.

You guys are awesome. Thank you!

If you didn't have a signed 8879, why did you create an efile?

My small tax practice only accepts clients that elect not to efile.

My small tax practice only accepts clients that elect not to efile.

I hope you don't advertise that. Pretty sure that's in violation of efile requirements.

My small tax practice only accepts clients that elect not to efile.

I hope you don't advertise that. Pretty sure that's in violation of efile requirements.

I do not advertise. I am down to less than 15 legacy clients, not even taking any new clients. These are elderly clients (old like me) that do not trust efile.

Is it really in violation of Efile requirements? Not if you only have clients whose choice (their choice) is not to Efile, I think.

Jake says

My small tax practice only accepts clients that elect not to efile.

I say *my* practice accepts only clients who elect not file at all. I have got my clients down to zero.

Is it really in violation of Efile requirements? Not if you only have clients whose choice (their choice) is not to Efile, I think.

My recollection of the rule is that paid preparers may not influence a client's choice whether to electronically or paper file. Further, the rule does state that preparers of over 10 returns must efile, unless their clients elect out. When making my comment, I was under the impression Jake had a larger practice than he does. In spirit, his approach may run awry of the rules, but I would agree the risk of consequence is minimal with a small number of clients.

"My recollection of the rule..."

Could someone pull up this rule so that we could get an idea where it comes from and what reasoning might support it...

Thanks

My recollection of the rule is that paid preparers may not influence a client's choice whether to electronically or paper file.

See Section 9 of Rev Proc 2011-25. The “influence” issue is in 9.03, about how it’s the taxpayer’s choice, alone:

This statement must be hand-signed and dated by the taxpayer (by either spouse if a joint return) on or before the date the taxpayer’s return is filed with the IRS. The choice to file in paper format is the taxpayer’s alone.

Prior to Rev Proc 2011-25, was Rev Proc 2010-85. The sample statement read:

My tax return preparer [INSERT PREPARER'S NAME] has informed me that [INSERT s/he] may be required to electronically file my [INSERT TAX YEAR] individual income tax return [INSERT TYPE OF RETURN: Form 1040, Form 1040A, Form 1040EZ, Form 1041, Form 990-T] if [INSERT s/he] files it with the IRS on my behalf. I do not want to file my return electronically and choose to file my return on paper forms. My preparer will not file my paper return with the IRS. I will file my paper return with the IRS myself. I was not influenced by [INSERT PREPARER'S NAME] or any member of [INSERT “ his” or “ her” ] firm to sign this statement.

This sample statement was revised in Rev Proc 2011-25:

My tax return preparer [INSERT PREPARER'S NAME] has informed me that [INSERT s/he] may be required to electronically file my [INSERT TAX YEAR] individual income tax return [INSERT TYPE OF RETURN: Form 1040, Form 1040A, Form 1040EZ, Form 1041, Form 990-T] if [INSERT s/he] files it with the IRS on my behalf (e.g., submits it by mail to the IRS). I understand that electronic filing may provide a number of benefits to taxpayers, including an acknowledgement that the IRS received the returns, a reduced chance of errors in processing the returns, and faster refunds. I do not want to have my return electronically filed, and I choose to file my return on paper forms. I will mail or otherwise submit my paper return to the IRS myself. My preparer will not file or otherwise mail or submit my paper return to the IRS.

Further, the rule does state that preparers of over 10 returns must efile,

No. The count *isn’t* with respect to returns prepared, but rather, with respect to returns “filed” (actually, reasonably expected to be filed). That leads to a conundrum in a case like Jake’s, where historically, Jake doesn’t “file” any returns for his clients, so he would “reasonably expect” to file 10 or fewer. Not only would Jake say he can give paper returns to his clients with no issues, he’d also say that he’s not a “specified tax return preparer” in the first place, so he doesn’t need to get signed out-opt letters either. FWIW, this is addressed in Section 9.06 of the more recent Rev Proc. That section basically provides a safe harbor that says, “If you get the signed statement, you’re good to go.” In reality, though, I think a guy like Jake could prove that he wasn’t the actual filer of all those paper returns sent in by his clients

And here I have been needlessly getting those signed opt out letters and attaching the Form 8948 since 2011? I will still continue to do that just to be safe. I have been preparing tax returns since the mid-80's as a sideline to my law practice, which is now very part-time. The reality is that my almost exclusively elderly clients want nothing to do with the internet. My major motivations in continuing to work at age 75 are (1) keeping my mind keen, and (2) allowing me the benefit of writing off off my health care insurance as an above the line adjustment to income. I hope some of my practical advice based on over 30 years of experience is of some help to others here. That said, I receive much more than I give from this forum, and I greatly appreciate the opportunity to participate.

Efiling mandate is not a blanket mandate. The law says that any tax return preparer who expects to "file" as opposed to "prepare"more than 10 individual tax returns is required to e-file.

The IRS website itself says:

"As of January 1, 2012, any tax return preparer who anticipates preparing and filing 11 or more Forms 1040, 1040A, 1040EZ and 1041 during a calendar year must use IRS e-file (unless the preparer or a particular return is administratively exempt from the e-file requirement or the return is filed by a preparer with an approved hardship waiver)."
Source: https://www.irs.gov/e-file-providers/mo ... irs-e-file

It also says:

"For purposes of this electronic filling requirement, a return is considered filed by a tax return preparer or specified tax return preparer if the preparer or any member, employee, or agent of the preparer or the preparer’s firm submits the tax return to the IRS on the taxpayer’s behalf, either electronically or in non-electronic (paper) form. For example, the act of submission includes the preparer or a member of the preparer’s firm dropping the return in the mailbox for the taxpayer. Acts such as providing filing or delivery instructions, an addressed envelope, postage estimates, stamps, or similar acts designed to assist the taxpayer in the taxpayer’s efforts to correctly mail or otherwise deliver an individual income tax return to the IRS do not constitute filing by the tax return preparer or specified tax return preparer as long as the taxpayer actually mails or otherwise delivers the paper individual income tax return to the IRS."

Source: https://www.irs.gov/e-file-providers/fr ... le-mandate