Efile extension AND mail extension with payment

[BHoffman]

Client needs to extend his tax return in order to have time to fund his SEP.  He wanted to send in full payment of his taxes with form 4868.

I sent him the 4868 with the amount filled in.  I also mailed his tax returns to him.  He sent back the signed 8879 forms.

Called him yesterday to confirm that he mailed in the 4868 form with his payment as we had discussed a month ago.  

He said he couldn't remember whether he used form 4868 or the 1040-V form (!).

Can I just efile the 4868 for him to ensure an extension is filed?  What if he did already mail one in with payment?  Any problems?

Thanks!

 

[RitaB]

I have done It before, and think it would be far better for them to get two than none.

[Lion EA]

E-file all extensions to get acknowledgements.

(Next time, don't send him the 1040-V if he's already paying with an extension.  I never send clients the 1040-V if they're paying via direct debit.)

[BHoffman]

He didn't pay direct debit, and I couldn't remember whether I sent the 1040V or not . I don't think I did.  

At least I do have an ACK for the extension, so I guess no harm no foul.

[Jack from Ohio]

Absolutely file the extension electronically AND have the client mail the extension form with payment.  How can you know for CERTAIN, that he/she will actually mail the extension on time.

In addition, an extension without an electronic verification is worthless, if the issue of whether it was filed or not comes to bear.  Even certified mail will not fly if questioned.

[joanmcq]

Do you put the amount of payment on the efiled extension or zero?

[Jack from Ohio]

1 hour ago, joanmcq said:

Do you put the amount of payment on the efiled extension or zero?

Zero.  Only ones that are mailed in with payment has any numbers.

Edited April 14, 2016 by Jack from Ohio
Grammar

[Catherine]

4 hours ago, Jack from Ohio said:

Zero.  Only ones that are mailed in with payment has any numbers.

I do this, as well - in case the client never sends the payment.  

[Lynn EA USTCP in Louisiana]

I have one client who insists on sending his own extension.  But, one year he was on his way out of town (airport), handed his extension envelope to someone at the airport (! ) with the request to put it in the mailbox.  Lo and behold that extension request never made its way to the IRS !  He complained bitterly that the IRS should have granted his extension since he gave the envelope to 'someone' to put in the mail.

I decided then to efile his extension with some guesstimate as to what he will be paying and sending him the paper voucher for him to send with his check.  Belts and suspenders for this guy.

[Lion EA]

I haven't e-filed all extensions in the past, but this year one of my mail-with-payment older gentleman is in the hospital directing daughter what to do.  So, I started using this method on ALL this year and going forward.  E-file extensions (especially now that CT is finally accepting this and some other new forms via e-file) for everyone.  Give paper extensions -- in addition to those I e-file -- to those that request and those that I encourage to mail payments.

[BHoffman]

Oh, you guys are GREAT!!  I have a few clients who need extra time to fund their SEP accounts and want to pay with the extension request with a check because they are fine with direct deposit, but object to direct debit.  I'm always so nervous, and now I can put that behind me   Thank you very much!

[Abby Normal]

5 hours ago, Jack from Ohio said:

Zero.  Only ones that are mailed in with payment has any numbers.

I would never file a zero extension. Unless the taxpayer legitimately expects to have a zero tax liability.

[Catherine]

16 minutes ago, Abby Normal said:

I would never file a zero extension. Unless the taxpayer legitimately expects to have a zero tax liability.

And then what do you do about a client who has given you NO paperwork by 4/15?  

[Bart]

14 minutes ago, Catherine said:

And then what do you do about a client who has given you NO paperwork by 4/15?  

I use last years tax liability.

[Catherine]

1 minute ago, Bart said:

I use last years tax liability.

And last year's withholdings?  

I'd rather send in $0, as I have NO idea if clients changed withheld tax or even have the same job.  Seems to me if I have NO information, anything I put down is wrong.

[Bart]

5 minutes ago, Catherine said:

And last year's withholdings?  

I'd rather send in $0, as I have NO idea if clients changed withheld tax or even have the same job.  Seems to me if I have NO information, anything I put down is wrong.

From the instructions for the 4868:

Qualifying for the Extension. To get the extra time you must:

1. Properly estimate your 2015 tax liability using the information available to you,

2. Enter your total tax liability on line 4 of Form 4868

3. File Form 4868 by the regular due date of your return.

Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes.

I do not tell the IRS anything about withholding or any payments.  I only need to estimate the liability not tell the IRS how it might get paid.

[GeneInAlabama]

I have filed zero extensions for many years with some of them winding up owing quite a bit and as far as I know, there has never been a problem.  

[Catherine]

They are getting a bit testier about back-denying extensions for those who owe substantial amounts.  However, I stand by my earlier comments that if I have ZERO information, a zero-dollar extension is what I send in.

[BHoffman]

The destructions say "information available to you", and that the IRS will contact the taxpayer if the extension is denied. I think it's an urban myth that the garden-variety taxpayers extension request will ever be denied because of all zeroes.  Not sure about those who might owe zillions but I've never heard of it happening.

[Jack from Ohio]

31 minutes ago, GeneInAlabama said:

I have filed zero extensions for many years with some of them winding up owing quite a bit and as far as I know, there has never been a problem.  

DITTO!  In the past 10 years, probably 3,000 zero extensions.  The IRS does not have the willpower, manpower, time or money to chase extensions.

[JohnH]

36 minutes ago, BHoffman said:

The destructions say "information available to you", and that the IRS will contact the taxpayer if the extension is denied. I think it's an urban myth that the garden-variety taxpayers extension request will ever be denied because of all zeroes.  Not sure about those who might owe zillions but I've never heard of it happening.

I saw it exactly one time in 40+ years of filing returns.  I had not filed the original extension or the return - I was just asked to help follow up on an audit.  The original extension showed zero tax liability, zero tax withheld, and zero tax paid.  (This was back when you had to send payment with the extension or it was invalid. I suspect the taxpayer didn't have money at extension time and just filled out zeros to get something in by the 15th).  The return showed $4K or so of tax liability, was audited a couple of years out, and the audit turned up $ 2K or so of additional tax.  The auditor added a 25% FTF penalty on the entire $6K, citing the fact that the original estimates were not made in good faith. They would not budge on the penalty. But the penalty only came about it an audit, not as any sort of routine matter. So invalidating an extension requires someone to actually look at the final numbers. It isn't likely to happen with any sort of routine filing.

Things are vastly different with respect to extensions now, and have been for many years.  The extension is valid no matter how much or how little is paid.  So there is no downside to estimating the tax liability on the high side.  I will give the client the range of my estimate and then let them decide how much they want to pay (if any) with the extension. I tell them that if they wind up owing, they will pay about 1% per month of FTP penalty + interest on the unpaid balance, but the extension protects them from the 5% per month FTF penalty.

One other thing.  I don't do zero-due estimates unless I'm positive they have an overpayment.  And I refuse to prepare extensions without knowing the withholding, unless in those rare cases where they have misplaced their W-2/1099 Forms.  I think that keeps me out of trouble since the withholding is a figure that is always available unless documents are missing.

 

[BHoffman]

JohnH - I knew I saw something about this and searched the Tax Book forum and found that thread.  

The IRS is supposed to notify the taxpayer if the extension request is denied.  If no notification was received by the taxpayer, I'd argue mighty hard that no penalty should apply retroactively and that reliable estimate was possible at the time the extension was due.  What's the difference between numbers that are way off from the final result or zeroes?  Neither are a "proper estimate", and both could be from "information available".

Sigh.  I don't like to make extra work for myself, but perhaps should rethink a little about the zeroes on form 4868.  Fortunately, I only have a few returns where I haven't entered anything at all.  

[JohnH]

That happened a long time ago, but I think we walked through all the possibilities with the auditor at the time.  Nothing is final until the SOL runs, so everything is on the table in an audit. In any event, the whole potential problem can be avoided by estimating the tax high and using any readily available info (especially withholding).  So I stay on the side that protects the client and me.  Better having to explain my reasoning on this forum than trying to explain a mistake to an upset client.  Or to an intransigent auditor, especially since there might be other more important issues to negotiate. 

BTW, full disclosure here.   I sent one in today without knowing the withholding.  But he told me up front he has misplaced his W-2 form.  I just used last year's withholding and tweaked it a bit.  I think he will likely owe about $1k, but the extension shows $2K due.  Nothing is being paid with the extension request. I feel fine about it and he can quit worrying..

 

[Catherine]

MA has gotten very fussy with no-payment extensions and back-invalidates them and charges late payment and no-extension penalties.  They WILL cave on that if you push but for the most part it's not worth the time/effort to a client to pay me $100 to fight a $20 penalty.  I think it's just the state's way of extorting more $$ out of people.

[Jack from Ohio]

Too much thought on this issue!  Let's put our thinking toward something that will matter...

19 years in this business.  ZERO issues for zero balance extensions.  Between my clients and the firm, over 8,000 zero balance extensions.

The only extension problem arose when the IRS would not accept the green card as proof the extension was mailed and received timely.  We lost the battle for not having an electronic confirmation number.