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Late Filers a Major Challenge

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Tax-filing and payment extensions expire in just days. Many of the more than 12 million taxpayers who requested an automatic six-month extension this year have yet to file, according to the IRS. October 15 is the last day for most filers.

Some have more time, such as military personnel in combat zones and some residents of flood-soaked Colorado -- but most do not.

“Late filers? God love them,” said Delmar Gillette, of Delmar C. Gillette Economic Planning Services Inc., in Newport News, Va., which in a typical year has between 5 percent and 7 percent of clients on extension. “They’re a challenge because they have postponed starting to file their return. How well do you think these people gather the necessary information to file an extended return? Just getting them to the office for a scheduled appointment is a major challenge.”

“We certainly don’t encourage late filing, because it really just spreads the work load further into the year for us,” said EA Cynthia Jeanguenat with Horizons Unlimited in Virginia Beach, Va.

“The clients who usually request an extension are not always the more organized clients, so the danger in giving them six more months to collect their information is that more information might be lost or misplaced,” she added. “That lost or misplaced information generally takes longer to replace, since payroll firms or departments are more than halfway through a new year and the prior-year info may not be as readily available in September as it was in February or March.” 

“We’ve never encouraged extensions, but certainly have some,” said Steven Hanson, a CPA with Minnesota-based Piehl, Hanson, Beckman PA and president of the National Society of Accountants, who added that his firm’s number of individual extensions remains about the same over the last several years.

“We’ve always taken pride in getting most of our returns done on time without extensions,” Hanson said. “That has become more difficult over the years, especially corporate returns with their earlier March due date.”

 

Not favorite clients

According to Stephen DeFilippis, an EA with the DeFilippis Financial Group in Wheaton, Ill., only about 3 percent of his clients file for an extension -- and he doesn’t encourage them. “[We] only file them in cases where my client does not have all of their documents prior to the regular filing deadline,” he said. “I prefer to get as much done during filing season as possible.”

“I hate extensions! I do not use the word extension without the descriptive ‘GD’,” said Robert Flach, blogger at The Wandering Tax Pro. “One of the reasons I was first attracted to the tax preparation business was that one could work 12 hours a day, seven days a week for three and a half months and basically take off the rest of the year. I long for the days when the tax season truly ended on April 15.”

 

‘Mad rush’

Recent rule changes allowing automatic extensions until October 15 actually delayed the filing of several individual returns until close to the October filing deadline, according to Hanson. “With the automatic extension only going until August 15, we filed more returns earlier than now. It helped spread our workload out a little better. We now have a mad rush in October to meet the deadline, as a good share of the clients who extend like to wait until the last minute.”

“Most enrolled agents like to get things filed on time so we can move on to other issues we handle during the year,” said Jeanguenat. “Our firm also offers business services, so we are a year-round operation. We also have to find time to fulfill our continuing education requirements, so we have plenty to keep us busy after April 15.”

 

Fees

The IRS urges taxpayers whose extensions run out on October 15 to double-check returns for overlooked tax benefits and then e-file returns.

“We announce up front that if all of the necessary information is not available by April 1, [clients] will go on extension,” said Gillette. “The group always pushing the April deadline is a predictable list and we know almost to the person who will be on it. We do have our favorite clients who sometimes find themselves with unexpected complications and need to be placed on extension. In our clients, going on extension is almost a sin. Some fight it tooth and toenail because it appears to be an admission of some fault. They’re concerned about an extended return being a red flag.”

Late filers, said Gillette, “are certainly worth charging a premium for all of the frustration they bring with them.”

10 Comments

I love extentions. We have almost 2000 business and personal tax preps every year and without extentions it would be impossible to do all by April 15. Mark C.

Posted by: Mark C | October 12, 2013 9:00 PM

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I started selling Medicare plans to supplement my income during the off-season. Since Medicare season officially starts on Oct 1, I have a small overlap between Medicare and the final filing date of October 15. But now that my flooded CO filers have until Dec 2 to file, it's creating some time management issues for me. That being said, these clients had some real business issues with their businesses (because of the flooding) and we are glad to have the extra time.

Posted by: Debra B | October 8, 2013 12:12 PM

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If I am going to go through the aggravation then I make it hurt. These clients just think we push the extension button and they have 5 months and 3 weeks to get us the information. Charge them $100 or $200 just to get an extension. The best that could happen is that they don't come back.

Posted by: hisexcellency | October 8, 2013 7:56 AM

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Because clients only hear what they want to from their tax preparers, when it comes to extension, we have changed our policy to providing clients with the necessary forms and links to file the extension on their own. Our compensation for preparing the extension rarely met our cost and increased liablity. Trying to get clients to return in a timely manner to was tax returns were labor intensive. And it appeared almost every year we would have 1-2% of the clients that never returned.

Posted by: oldcorps1947 | October 7, 2013 1:43 PM

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For extensions, I have a different approach. If my client has a fairly complex return with partnerships, rentals, S corporations, stock transactions, I encourage the extension. I use the information given me in April for tax planning for that year and if money is needed for an extension, then put it on hold until September. Reason? Many people in this category lose some of their documents so this gives me the option to print a transcript from the e-services website telling me Exactly what income was reported. I have a client that I was finishing yesterday that hadn't given me interest income of $435 (he had many others), plus the k-1 from his s-corp was different than the one that was filed. The taxable income on the k-1 he received was $3k more than what was filed with the corporate return. I am certain that if we had filed the 1040 with the incorrect k-1 income, he would not have received a proposed correction for over reporting income. Eileen Sautner, Newberg OR, USTCP, EA

Posted by: Eileen USTCP | October 7, 2013 1:20 PM

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Myself a sole-practitioner as well as a several of my friends who are also sole-practitioners have decided to stop enabling these late filers and refused to be stressed out by them.

These clients have been reminded multiple times over the tax year--every year--with the last time being late September. If their returns don't get filed on time, so be it. They've earned their penalties.

They are all grown-ups and they know the rules. Tax deadlines are like Christmas; they come on the same day every year.

It may sound harsh, but I have stopped trying to teach clients to take responsibility in matters they already know they should. Is there the extenuating circumstance now and again? Of course, and I am compassionate to those needs. But we know who the habitual offenders are in our practices - and we should not let them hold us hostage until 10/15. And if they are not going to assemble their documents on time, what are the chances of getting paid on time?

Posted by: deltax | October 7, 2013 12:04 PM

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I have two extended returns to do right now. They're half-done, because I'm still waiting for the rest of the information. I've told them I can finish the returns if they get the information to me on time..if not, well too bad. It's the 7th of October ....I wonder how close they're going to cut it this time.

Oh yes, they do this every year. And they've had all the information since January.

Posted by: MizLiz | October 7, 2013 12:02 PM

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In our firm we have told clients for years that we do not do any work the last five days of tax season and we file extensions on the 11th or 12th. I find that by that time my brain has endured about all it can handle and the chances of mistakes are greater and I do not like to take the chance of making a mistake even though every return is double checked prior to leaving the office.

That said I still would rather not file extensions but they are a fact of life.

This year though I am finding that I am still hounding a few to get the last of the information is so we can complete the return this week I have told them they must be done by this Friday just to be safe and I bet I will do one next Monday but not be happy.

Posted by: ROY F | October 7, 2013 12:00 PM

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Extensions are a fact of life, but I have come to loathe extensions because of the constant need to hound clients to assemeble their paperwork and come into the office and get it done; in half the instances, of course, clients are awaiting K-1s from s-corps and partnerships, which delays the timely filing process; nevertheless, many just want to put off the day of judgement, so to speak, and though we advise them of the accrual of late payment and underpayment penalties and interest if tax is due, many eschew that and still delay the inevitable- just adds to our stress load, especially when we have other deadlines in October as well i.e. 941s, sales tax for monthly filers, and the inevitable insurance audits that also seem to pop up at this time of year; oh well, it's part of the business.......sigh

Posted by: gell3334 | October 7, 2013 11:28 AM

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With the IRS continuing to raise the bar on accuracy and due diligence it has placed tax professionals dealing with late filers in a precarious situation. If we don't take the time to insure accuracy we can be fined. You are faced with the deadline to avoid late filing penalties but easily open the door for accuracy related penalties.

We have taken the position that if information comes in late (past September 20th) we will not file a return we feel places the firm in jeopardy until we have all the information to file correctly. The engagement agreement contains a section directly dealing with this to protect us and the taxpayer.

Posted by: Grandj | October 7, 2013 10:55 AM

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