No records and needs an extension!

[jklcpa]

What am I going to do with this guy?!  It's every year and getting worse. It's not like April 15th isn't a new date to anyone.

The other day I was in the area of his business and managed to pick up his and wife's W-2s from a manager of his business that happened to have copies of the forms. That's another story. He thinks he may have given all his tax documents to his new loan officer at the bank who was going to help him prepare his personal financial statement that the bank requires to renew his business line of credit.  He mistakenly thought he'd given me documents.

I've asked and reminded him multiple times that I have not received anything from him for 2023 tax year. Today on the phone I had to repeat 3 times that I needed all documents with withholding on them (two 1099-SSAs and 1099Rs for their numerous IRA distributions and wife's pension).  He also has a few investment accounts too.

He is 80 and a long-time client. I know he's overworked and also in the early stages of cancer treatment, but seriously, what can I do?  What would you do?

[mcb39]

File an extension and hope for the best.  I have a client who brought in his jump drive with all of his bookkeeping and it is a total scrambled useless mess.  We asked for his inventory and we got a number three times more than his purchases for the year.  A blind man would know that his COGS would be way off.  And, of course, even though he is retired from law enforcement, he is far busier than I am and doesn't have the time to get it together and hates bookkeeping and blah, blah, blah.  He hasn't gotten his refund yet from last year.  I wonder why, even though we tried to work a miracle. 

I just finished another one tonight who knows far more about taxes than I do.  Of course, he went gambling and won a pretty small jackpot (but he can wipe it out with his losses) Nope!  You know the rest of the story.  If he picks it up tomorrow, he, (rather SHE) is FIRED.

[Catherine]

All you can do is file a zero-information federal extension. Gives him 6 months on the SOL to claim any refund, if he finally gets his docs to you next year.

We are not their mommies and can't make them do anything. Nor can we allow ourselves to care more about their own taxes than they do. If he has late penalties and interest it's not your fault and there's nothing you could have done to fix it. 

[mcbreck]

Speak to the wife and explain the situation and the two of you can come up with a solution. Cancer treatments can cause serious chemo brain fog as well as being 80 years old can cause brain fog. My route would be to do an extension and get a copy of the transcripts in late summer.

The fact an 80 year old has a business is problematic.

[Lee B]

1 hour ago, mcbreck said:

 

The fact an 80 year old has a business is problematic.

 i have a client who is 83 years old who is a business owner and is still very sharp and with it.

[jklcpa]

My client is sharp too, just the ultimate procrastinator. His type of treatments won't cause any brain fog, but just one more thing in his day that's taking up time.

I know about the cancer issues with my husband having had 3 types, 4 if we count minor skin cancer too. Throat, prostate, and TCC aggressive bladder cancer.

[mcb39]

7 hours ago, Lee B said:

 i have a client who is 83 years old who is a business owner and is still very sharp and with it.

I am 84 years young, but I tell most people 78.

[GLJEANNE]

Their procrastination is not your emergency.  This is a motto I have to remind myself about constantly.  I'd warn him that he'll likely face penalties and interest, and then go ahead and file a zero extension.

 

[Margaret CPA in OH]

Indeed, posted prominently in my space:

Lack of planning on your part does not constitute an emergency on my part.

I also have to remind myself of this frequently, however, as it seems at times I care more about the client than they do.

[Catherine]

9 hours ago, Margaret CPA in OH said:

however, as it seems at times I care more about the client than they do

Next lesson: we cannot allow ourselves to care more than the client does. Care about the quality of our work, yes! Care more than they about penalties for being late? Nope. And I at least have to re-learn this every couple of years.

[Sara EA]

I don't like to file zero extensions unless I'm absolutely sure the client is due refunds.  IRS can reject extensions you know.  Say someone ends up owing $50k and filed a zero extension, IRS can say No Way and hit him with failure to file penalties.  I've never seen it happen--has anyone else?  I'd have the client pay $10 or something with the extensions.

[Jim Oh Bkkr]

8 hours ago, Sara EA said:

I don't like to file zero extensions

Yes!  I always go for absolute "worst" case scenario.

8 hours ago, Sara EA said:

IRS can reject extensions

"Void" is the terminology I remember (early 90's). 

[BrewOne]

If a client wants to file a zero extension, tell them to go online at irs.gov and use Direct Pay to pay something before the deadline--counts as filing an extension.  If they balk...not a very good client.

[BrewOne]

I should have said, "If a client wants us to file a zero extension for them"

[JohnH]

10 hours ago, Sara EA said:

I don't like to file zero extensions unless I'm absolutely sure the client is due refunds.  IRS can reject extensions you know.  Say someone ends up owing $50k and filed a zero extension, IRS can say No Way and hit him with failure to file penalties.  I've never seen it happen--has anyone else?  I'd have the client pay $10 or something with the extensions.

I did see that happen one time (over 20 years ago). I hadn’t prepared the extension or the return, but was asked to look over an audit report.  The original extension request showed zeros on all lines.  The actual tax liability was significant - $15 k or so. The taxpayer was self-employed and clearly should have know there would be tax due.  The audit only turned up a nominal amount of additional tax - maybe $1k or so.  But the auditor added full FTF penalties, stating that a reasonable estimate of the tax liability was absent from the 4868 and thus it was invalid.  
 

That’s the only time I’ve ever seen that happen, so I conclude there’s no attention paid to the numbers in the 4868 unless there’s an audit.  But then  they have a slam-dunk case for invalidating the extension retroactively if the extension shows all zeros. That’s why I agree with the approach to estimate the projected tax liability high, even if there’s only a token payment (or no payment)  submitted with the 4868. It’s perfectly fine to lowball the payment (or even not submit a payment), but don’t lowball the expected liability. 

[Abby Normal]

If I have nothing, I just use last year's tax as a guesstimate for this year. I automate that in ATX by linking the prior year tax from the comparison form to the 4868. It's better than zero.

[jklcpa]

38 minutes ago, Abby Normal said:

If I have nothing, I just use last year's tax as a guesstimate for this year. I automate that in ATX by linking the prior year tax from the comparison form to the 4868. It's better than zero.

That's what I do too, but it is so frustrating. This is a large return in terms of the number of bank, brokerage, and retirement accounts and pensions this couple has.

[Lion EA]

But then we're waiting on signatures to direct debit payment  to the IRS, and especially to the states where so many require payment to accept the extension. I've been sending these late ones to DirectPay and their state equivalents. Then they call/email me with questions, but I can go only so far in the states to tell them each step. I'm tired. And, cranky!

[Abby Normal]

We treat the payments as a separate from the extension, and the client handles that, most of the time. so we efile extensions without payments and let those who normally know they should make a payment.

[Catherine]

When there is NO information on which to base anything - no papers at all, a client who varies year to year from owing v getting refunds - the worst that happens, that I see, is that the IRS invalidates the extension later. But they may not. If there ends up being a refund, you have extended the statute for collecting that refund an additional 6 months. I have a couple of clients who show up every 3 years, with 3 years' worth of documents in hand. I put in extensions, every year, just in case. 

They know the risks (as they get told, by yours truly) and if they don't pay anything it's all on them. I figure it's worth a try, for minimal effort on my part.

[GLJEANNE]

I have had clients to whom I've just sent the extension forms and told them to file it themselves, with warnings about underpayment, etc.

[Catherine]

On occasion I'll send an extension form with recommendations, or (for those internet-savvy) a link to Direct Pay. Up to them, though. I'm not their mommy and they're supposed to be grownups!