4868 extension denied?

Technical topics regarding tax preparation.
#1
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Have any of you had an automatic extension denied? I have a client who efiled the 2021 personal return 6/1/22. We had filed an extension on time in April. We nor the client have received any correspondence from the IRS that the extension was rejected. But the client got notice CP14 showing about $1300 late payment and late filing penalties for being 2 months late. First it is only 1 month late. Second, an extension was filed by 4/18/22 so there should not be a late filing penalty.

To confirm I checked the 4868 that we sent on paper. Though the taxpayer had $19K of tax in 2020 and (yikes!) we showed all zeroes on the extension. Lacking other more current information our default extension total tax is the prior year tax rounded up. We pull these from Ultratax data mining into excel and each row of the spreadsheet populates the fields in a software 4868. Which we then print and send in bulk by Fedex.

We made a massive error for the 2021 extensions. Our query was from 2021 returns (all returns not worked are zeroes). Should have been a query of 2020 returns. The result is a bunch of the extensions show all zeroes.

I have never had an extension denied (40+ years) on the issue of an unreasonable total tax (actual total tax turned out to be $33,000 and balance due $13,000).

I am going to respond that we filed an extension so it wasn't late and send them the copy of the 4868 that shows zeroes. I'd feel alot better if we had not screwed up. We sent hundreds on 4/18/22 and probably 80% of them are all zeroes. Larger clients we didn't use this default method but rather worked up an amount and efiled the extension. But there are lots of zero extensions we filed. Our paper extensions have our address so if any were denied we should know by now. I hope.
Last edited by Texas Al on 29-Jun-2022 10:56am, edited 2 times in total.
 

#2
MilesR  
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If it was mailed then chances are the IRS just hasn't processed the extension. Just send a copy of the extension and the fedex tracking showing it was mailed timely. They should honor that. I don't think they'll care that it had 0's on it. They'll get the late payment penalty regardless.

Last I heard, the IRS is backlogged by over 21 million paper returns. Expect anything paper to take months for them to process.
 

#3
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I hope that to be the case - though this is the only notice of this nature for 2021 returns I know of that we have received. We do the extensions in bulk like this to save time. The only way to efile them is access each client in Ultratax (clients that need an extension) and enter total tax etc, or efile in bulk and then there will be a bunch of zeroes on that too.
 

#4
sjrcpa  
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The extension gets you out of late filing penalty but not late payment.
Filing on 6/1/22 is 2 months late for penalty purposes - it's per month or part thereof.
 

#5
MilesR  
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I bulk e-file plenty of extensions with 0's every year and have never had an issue. I'd bet they just didn't process the paper extension yet. The only one I had an issue with this year was a partnership that I paper filed an extension for because the IRS kept rejecting the e-filing for some reason. They just didn't process the paper extension before we filed.
 

#6
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sjrcpa wrote:The extension gets you out of late filing penalty but not late payment.
Filing on 6/1/22 is 2 months late for penalty purposes - it's per month or part thereof.


Yeah thats right - May 15 is one month. In normal cases the IRS probably pays little attention to the amounts on the 4868. In this case I will be presenting a copy in defense of their saying the return was filed late (5%/mo) so it may be scrutinized more than it otherwise would.

Thanks!
 

#7
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OK so I prepared a response to the late filing penalty assessment, included 2848, copy of notice, and copy of the 4868 with all zeros, proof of Fedex pickup on 4/18/22, etc. Office manager prepares the envelope for certified mail, drops in the mail here in the building (not the PO).

Client later calls and says he has receivde ANOTHER notice. At this point I am sweating bullets, I can just see that half our extensions are to be "null and void" or otherwise rejected. I spoke with the client and it turns out the notice removes the late filing penalty, leaving only the late payment penalty. Great! Musta just processed the paper extension.

Now I wish I had not sent the response bringing attention to the extension that showed zeros (even though it reasonably could have been zeroes if not for some capital gains on a late 1099-B).

Fortunately our office manager was able to intercept the package so it got un-mailed thanks to the security of the building. Got lucky.
 

#8
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Office manager prepares the envelope for certified mail, drops in the mail here in the building (not the PO).


Hate to tell you this but unless the white "Certified Mail Receipt" is processed by the post office with their date stamp - it is not considered "certified mail".
 

#9
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Michaelstar wrote:
Office manager prepares the envelope for certified mail, drops in the mail here in the building (not the PO).


Hate to tell you this but unless the white "Certified Mail Receipt" is processed by the post office with their date stamp - it is not considered "certified mail".


Yea it wasn't any kind of mail because we were able pull it out before the USPS picked up.

Another client has gotten the late filing notice, then another notice reversiing.

A 3rd client got the notice of late filing and no other notices yet.
 

#10
Joan TB  
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...proof of Fedex pickup on 4/18/22


Just remember that you can't use FedEx for an extension with a payment cuz that goes to a PO Box.
(Or will the IRS accept it as timely anyway? I wouldn't wanna test it!)
 

#11
supdat  
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Just remember that you can't use FedEx for an extension with a payment cuz that goes to a PO Box.


The IRS does supply FedEx addresses to use (they call it a "private delivery service", or "PDS"), though I never tried FedEx with an income tax return or an extension. I used FedEx recently for an estate tax return extension filed very close to the due date, that was processed no problem.
 

#12
Joan TB  
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I was saying (prehaps not very clearly) that the only mailing addresses I have seen for 4868 payments are to a PO Box, which of course cannot be used by FedEx. I know that PDS can be used, but where would one find the PDS delivery address for a PAYMENT for Form 4868 -- it's not on the form under "where to file".

Form 4868 withOUT a payment do not go to a PO Box, so PDS (FedEx) would work.

It also seems that I have noticed that not all PDS are the same for every type of form. I would be careful about double-checking that. Luckily for me, USPS is a very easy option for us (5 minutes away.)
 

#13
TrueTax  
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I don't know if the procedures address it, but I did in the past send a return and payment by a PDS to the physical PDS address given even though it included a payment and normally with a payment it would have been sent to a PO Box address. I did this because it was a late return and the time of RECEIPT by the IRS was critical in avoiding an additional month of penalty, since I couldn't use the timely mailing as timely filing rule at that point. It was a few years ago, but I don't recall any problem with the processing of the return or posting of the payment. These days with the backlog of mail at the submission processing centers, I'm sure the clearing of the payment would be delayed, but maybe they would still credit it on the date received, I don't know.
 


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