Personal extension being accepted for S-corp?

[Jack from Ohio]

Tax year 2011.

Extensions for personal and S-corp were both mailed. IRS sent penalty letter saying S-Corp was late. We responded with copy of the extension. (not sent certified) IRS contends that the 7004 was not received.

Personal return was refunds, so there was no need to verify if the IRS received the personal extension.

I recall hearing in a seminar that the IRS would accept the personal extension for the S-corp as well. I cannot find the reference material, but I am certain the speaker told this. He even gave the wording to use in the letter.

We sent a letter to the Appeals Coordinator referencing IRC 6651 and documenting that all K-1s were issued timely and all shareholders' returns were filed timely with all taxes paid. This letter was sent 2-18-13.

Client received no more letters till yesterday. The notice received is simply the IRS sending the amount they say she owes for late filing to ACS. No letters in response to the letter to the Appeals Coordinator. I have faith that this lady did not receive any letters during that time because, when it comes to the IRS, she is as nervous as a long tailed cat at a rocking chair convention.

Any information or suggestions would be greatly appreciated.

For the record, we mailed the 7004 from our office, not certified, so I know it was sent.

[Margaret CPA in OH]

I can't answer the direct question but can tell you that I received a club newsletter last week that had someone's state tax payment envelope slipped into to it clearly in error. It looked as if the mail carrier may have tossed outgoing mail in with lots of other mail and shuffled things together. Clearly the payment was past due by the time it arrived at my house. I put it into the mail with a note stating that it was in the newsletter but it could easily have fallen out or someone else could have tossed it. Mail gets lost, sad to say.

[ILLMAS]

Jack is the client return under examination or in appeals? If not the letter you sent is a on top of someone's desk just collecting dust, try fixing through the tax practitioner hotline.

[cred65]

Jack,

I was successful for year 2011 with the following letter in Cinti, OH 45999-0039. They accepted the abatement based on the last paragraph re Code Sec. 6231(a)(1)(B

"I have enclosed Form 2848 Power of Attorney to authorize me to represent the taxpayer.

The taxpayer was assessed a late filing penalty of $2,340.00 for year 2011.

However, we disagree with this penalty based on the fact that an extension Form 7004 (copy enclosed) was timely filed. We made a timely attempt to e-file the Form 7004 but the extension was rejected for MEF errors on 3/06/2012 (form attached). The Form 7004 was then mailed to the IRS, Cinti, OH 45999-0045 on a timely basis. Therefore, we are requesting the penalty be abated.

Also, the above partnership qualifies as a small partnership under Code Sec. 6231(a)(1)(b ). Please be advised that for the year at issue each partner fully reported his share of the income, deductions, and credits of the partnership. Thus, we are requesting that the penalty be abated as specified under the provisions of Rev. Proc. 84-35.

Thank you for your consideration."

[Max W]

"Personal return was refunds, so there was no need to verify if the IRS received the personal extension."

It may have been true in that case, but it is not always so.

Late filing of a refund return can result in losing elections required to be filed on a timely basis - Bonus depreciation, IRA contribs, NOL carry forward, to name just a few.

[jklcpa]

Jack, re: cred65's post, rev proc 84-35 applies to partnerships and does not include S corps, although I suppose it may not hurt to try to apply the same logic in your situation with the income being properly reported on the timely filed personal return.

Also, unless you have a POA, technically only the taxpayer can request penalty abatement, so if the letter you sent was on the firm's letterhead and the firm didn't have a POA, it will most likely be ignored by the IRS.

I agree with Margaret, that unless you filed the extension electronically and received a valid acknowledgement, you don't know whether or not the paper-filed extension ever reached the IRS.

[Jack from Ohio]

Jack, re: cred65's post, rev proc 84-35 applies to partnerships and does not include S corps, although I suppose it may not hurt to try to apply the same logic in your situation with the income being properly reported on the timely filed personal return.

Also, unless you have a POA, technically only the taxpayer can request penalty abatement, so if the letter you sent was on the firm's letterhead and the firm didn't have a POA, it will most likely be ignored by the IRS.

I agree with Margaret, that unless you filed the extension electronically and received a valid acknowledgement, you don't know whether or not the paper-filed extension ever reached the IRS.

The letter was from the client, and I did write one using the timely filed returns and K-1s being timely submitted.

[ILLMAS]

The letter was from the client, and I did write one using the timely filed returns and K-1s being timely submitted.

Don't waste your time writing the letter, it won't help, the damage is done. All you are going to get is a copy the original letter they rejected and a NO. I just went through this last month, I wrote up a letter with the reg code and the client received a letter letting him know they did not accept the first letter and they also gave him a copy of the first excuse letter. My client sent the letter in 2010, I prepared the letter similar to cred65 in Nov. 2013 and the response arrived last month.

[Jack from Ohio]

The client has received NO communication from the IRS between Feb 2013, when the letter was mailed, and the notice today stating they have been turned over to the ACS. She has NOT received a rejection letter concerning either of the two letters she sent.

[JohnH]

In this situation, I'd probably call IRS with the client conferenced in on the call. There's a 50-50 chance the IRS person will handle it on the phone, and probably a 75-25 chance they will at least stop it from going into ACS for 69-90 days to afford you a chance to send a fresh letter (via Express Mail) summarizing all prior correspondence.

[michaelmars]

i have used the partnership exemption many times for s corps and had success. a lot depends just on who you get that reads the letter.

I have Never gotten a POA in a matter such as this. the irs will read and respond but the response will go to the taxpayer not to you without the poa.

as for the late filing of refund 1040's, I agree that it is a bad practice not to get an extension for the reasons mentioned above, and I once had a penalty assessed which is based on the total tax, not the tax amount due. Even refund returns can get late filing penalties and underpayment of tax penalties.

my practice is to send all -0- extensions from this office. I only send one envelope to each required address with a list of the taypayers that are enclosed. I request in the cover letter that a copy get stamped with a date received and sent back to me. I enclose a sase. I have never failed to receive the stamped letter back and it only cost me one postage fee for each address.

if for some reason I am sending off extensions with checks, I do use a separate envelope for each.