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Terry D EA

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Have a client who showed up on April 18th with two years of tax returns due. The client did not want to file and extension, so I prepared the returns and during the review process after the client left the office, I realized that the client was able to deduct sales tax expense on Sch A for both returns. I admit, this was overlooked when the return was prepared. After I discovered the omission, I did not transmit either return and contacted the client and it took a week or so before the client returned my phone calls. This client had a balance due of $4500.00 for 2015 and roughly the same for 2014. I informed the client that more than likely a failure to file penalty would be assessed on the 2015 return and the 2014 return. Due to my lateness I would consider paying the  penalty for 2015 if the IRS assessed it. Well you guessed it, the IRS did indeed assess the penalty. The penalty is $194.00. Here is what burns me. First, my office is in my home. 2. This client shows up on Sunday, accuses me of not answering my phone which according to my phone caller ID, she never called. Sundays and especially after season are my personal time and not anything close to business hours. I was working in the back lawn when she showed up. The nerve of some people. When I read the IRS notice, I asked her when she planned on paying the balance due and she said she had no intentions of paying the tax due anytime soon. Apparently all she wants is the 194.00 paid to her. I told her I would check my notes and let her know my decision. If I do decide to pay the penalty, can I not just make the check payable to the IRS and mail it to them referencing her account? Having to pay the penalty is not something that bother's me if it is indeed my error. I really feel like paying it and telling this client that I will no longer be providing services to them. Suggestions anyone?

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Write the check to the IRS directly, referencing her SS# and the tax year for the penalty. I would pay late filing penalty only.  Get something in writing that she is acknowledging you paying the late filing penalty.  Her late payment penalties will be much larger than that.

For 2014 you are not liable for ANY penalties. 

In your situation, I would have electronically filed an extension the moment I realized I could not make the deadline.  Side note, I would have told her "We are going to file an amendment and I will work on them next week."  If she resisted, I would have handed her back her information and shown her the door.

I am all for assisting our clients, but if an adult cannot or chooses not to read the calendar, that is NOT my issue to move into emergency mode.

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I do agree with both of you. Jack you are correct with what I should have tried to do. I couldn't get a signature and therefore refused to file the returns. I should have filed the extension anyway. This is a learning curve that I didn't need to learn. I will pay the penalty as you outlined which was my initial response. I plan on sending her a certified letter of my intensions that will outline what I will pay and how it will be paid. Her failure to pay penalties plus interest will escalate and that is her problem not mine. The letter will indicate my desire to terminate our business relationship.

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So you're saying you don't want to hold her hand while she pays this off over the next 4-5 years, constantly reminding you of YOUR mistake without admitting her own mistakes of much greater magnitude?  I think you're on the right track.  :)

Pay her the $194 and terminate.  As long as she gives written acknowledgement of receipt of the $194, why should you care whether she sends it to the IRS or spends it getting her nails done?

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Terry, and please learn also "any returns coming in after XX date, will be put on extension". No if, buts, or ands.  Heck, the last few days of the season, I wasn't even filing extensions for any new clients; I directed them to IRS.gov and told them to do it themselves. 

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17 hours ago, JohnH said:

So you're saying you don't want to hold her hand while she pays this off over the next 4-5 years, constantly reminding you of YOUR mistake without admitting her own mistakes of much greater magnitude?  I think you're on the right track.  :)

Pay her the $194 and terminate.  As long as she gives written acknowledgement of receipt of the $194, why should you care whether she sends it to the IRS or spends it getting her nails done?

John I agree and this indeed was my first thought to pay the penalty and cut my losses. However, I have my reasons for wanting to pay the amount directly to the IRS. Otherwise they will never get which is not my problem. There is something to be said for principal though. Either way, when I pay, I will have corrected my error and will not loose any sleep over this one.

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If you pay the IRS directly they will probably not credit that money to the late filing penalty.  Write her a check with a memo on the check saying this is for reimbursement of late filing fee.  You may have your reasons for paying to the IRS directly  but whether or not she pays her taxes/penalties isn't your problem.  

i am a bit confused.  You said she dropped off her papers on 4/18 and went into a whole thing about the nerve of her coming on a Sunday.  The 18th was Monday.

in any case, no matter how you look at it, you made the error.  I don't see any reason to drop her.  

For the record, I would have e-filed "as is"......and then amended.  There wouldn't have been the additional fee and the amendment would have reduced the tax liability.

i'm not sure if any extension would have done anything (in terms of the late filing fee) if she didn't pay the tax due by the 18th.

 

 

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Ms TabbyKats, Thanks for your reply as you are correct and what I should have done has been clearly identified. I can guarantee this will not happen in the future. This whole thing started with me trying to help a client who told me they didn't have the money to pay my fees. This is one of those instances where my heart got in the way and it cost me. Yes, I did get paid on April 20. Yes, I should have filed the extension and added those fees to the total but I didn't and now I have what I have. To add further, it took a week for the client to return to my office and sign the 8879 forms which we all know I could not transmit the returns until the forms are signed. This is where things went South because I once again offered to help if the penalty was assessed but had no idea it would take so long for the client to sign the forms. Nevertheless, late filing is still my fault. The Sunday issue just occurred two days ago. The client accuses me of not answering my phone which is why they showed up in my back yard unannounced and uninvited. My business phone is an Android mobile phone and I have not received any phone calls from this client since April. This client has become a PITA. I have office hours just like everyone else regardless of where my office is located. It is really not my concern how the IRS applies the payment. There will be no misunderstanding between the client and my office as to what the payment was for and this will be well documented.

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1 hour ago, MsTabbyKats said:

If you pay the IRS directly they will probably not credit that money to the late filing penalty.  Write her a check with a memo on the check saying this is for reimbursement of late filing fee.  You may have your reasons for paying to the IRS directly  but whether or not she pays her taxes/penalties isn't your problem.  

i am a bit confused.  You said she dropped off her papers on 4/18 and went into a whole thing about the nerve of her coming on a Sunday.  The 18th was Monday.

in any case, no matter how you look at it, you made the error.  I don't see any reason to drop her.  

For the record, I would have e-filed "as is"......and then amended.  There wouldn't have been the additional fee and the amendment would have reduced the tax liability.

i'm not sure if any extension would have done anything (in terms of the late filing fee) if she didn't pay the tax due by the 18th.

 

 

The extension would have completely eliminated the 5% monthly failure to file penalty. All that would have remained is the 1/2 of 1% monthly failure to pay penalty and a tiny amount of monthly interest. 

Filing an extension with proper estimates is an absolute guarantee that no FTF penalty will be assessed. It makes no difference how much is due on the estimate or whether the client pays all, some, or none of the balance due. 

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Well here is the final outcome. I notified this client that I would be sending them a letter that would outline the position that I am taking with this and when I would forward the payment as well as them signing a form to acknowledge acceptance. The client e-mails me and tells me to forget it and now they don't want me to do anything and once again accuses me of not answering my phone and trying to make a big deal out of this issue and outlines the horrible service they got from me. My response: I apologized for their misunderstanding and that I have not refused to live up to my intentions and would update my records to reflect their position.

Here is what I am doing. I am working in my office in another client's books with the phone right beside me as usual. Although it very nice, the phone has not rung so far today. I have printed the e-mail and put it in the client's file. I am still tempted to write the check to the IRS anyway so that I have a clear conscience of correcting my mistake.

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43 minutes ago, Terry D said:

 I am still tempted to write the check to the IRS anyway so that I have a clear conscience of correcting my mistake.

Save your money.  Make the necessary notations in their file.  If your phone system has the capability of printing call history, do that as well.

Then sleep well at night.  No matter how large a hammer you  use, you cannot fix stupid.

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Terry-

This client obviously doesn't care about filing timely tax returns or 2014 would have been timely.

You made a mistake; it could have been handled differently.

We all have made mistakes; don't beat yourself up over it.

If this client is so unhappy, he won't be back anyway.  But, when he calms down and you calm down, he may give you his business again and you may want it.

So...do nothing.  Did you ever think he may have dialed a wrong number?

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15 hours ago, MsTabbyKats said:

Terry-

This client obviously doesn't care about filing timely tax returns or 2014 would have been timely.

You made a mistake; it could have been handled differently.

We all have made mistakes; don't beat yourself up over it.

If this client is so unhappy, he won't be back anyway.  But, when he calms down and you calm down, he may give you his business again and you may want it.

So...do nothing.  Did you ever think he may have dialed a wrong number?

Thanks and the wrong phone number is a possibility. However, I have had the same phone number for 18 years and counting. I normally deal with higher end clients who pay their taxes regardless of the amount due. None of them ever have any problems reaching me when needed. I must say, all of them respect my business hours and never call me on weekends or show up unannounced. Here is what I know, that for every client I loose, three new clients normally take their place. We added 18 new clients to our client base this last year so for a one man show dealing with the level I deal with, 140 clients is enough. Well, now it is 139. Just saying. Cutting my losses and moving forward.

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Terry:

You do this part-Time, right?  I believe you have a regular job, so the taxes are a supplement?

Even with that, you still get the same PITA things that those of us who do this all the time get.  We are trying to help you realize where the mistakes are in this sitch.

First, I would extend folks on April 15/16/17/18 no matter what.  You come in my office, I agree to work with you, I extend your return, whether or NOT you agree.  If the return is in my office, on the 10th or 11th, it gets extended, even if completed, even if in process, even if new, even if I did your return last year, and I have not heard from you this year.

Why?  So you don't get wrapped up in pretzels over $194....

A client comes in at the end of season?  Make your choice to do their work or not.  And then run with that decision.  Its ok either way.  I just extend, and meet with them later.  If they are insisting on filing "on-TIME!", then I get really hesitant...  "Why are they rushing ME???"  And they pay me ALOT more....

IF its ready to go, file it.  Amendments are easy. 

IF there is a penalty that could be my mistake, (in this case the $194 is on your clients, not YOU) I write an abatement letter to the IRS.  If the IRS says no, and I like my reasons, I appeal.  If that doesn't work, then I pay the IRS the penalty and accrued interest.  I do not write refund checks to clients.  If the IRS gets overpaid somehow, the refund goes to the client, but that isn't my concern. 

Claiming that *I* didn't answer the phone?  I just agree with them.  "No, I didn't. I only talk to folks during business hours, my billing rate triples after 5pm."

I stay on my side of the street with the clients.  In this case, maybe because of prior relationships, you helped this client out at the last minute.  Then, it became so much MORE after that.  Stay on your side of the street.  The client is always right.  They are now a fired client, but they are "right".  And that's ok.  You have 139 happy clients.

If a client shows up at my house? I probably have a pretty good idea why they might.  I have stepped on my crank somehow with them.  It happens.  It sucks.  But I can be pretty blunt with them at that point.  They are on my property, on my time, and if they want to be angry?  Please, just get back in your car... 

Rich

 

   

 

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Thanks Rich and I am going to implement the extension plans that everyone has mentioned. When I send out my client letters, the policy I put in place will be outlined. The client mentioned in this thread was a new client recommended to come to me by a very good loyal client so I was hesitant in my decisions. I have other clients that I have had for a number of years that I know the extension is an option they would not protest.

BTW- You are correct, that I have a full time and the tax thing is/was supposed to be part-time. Not so much part-time now. I do a lot of accounting services as well so I am not working year round but still on reduced hours during the off-season.

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It used to be hard for me to say NO.  Life got a whole lot easier after I learned how.  Yesterday, a  PITA client who was MIA this year called and left a message saying she had filed her own return.  She just had a tax question.  Did I return her call?  NO.  WIll I answer the phone if she calls again?  NO.

So, I think to remain sane in this job the ability to say NO is crucial....and say it in a nice way, maybe with a big hug ;)

 

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