JohnH Posted April 15, 2009 Report Share Posted April 15, 2009 So I had all my extensions finished yesterday. As planned, today has been mostly about 1st Quarter payroll reports and double-checking on the extensions. Well, except for one little twist: When I came into the office this morning I found a W-2 & 1099-R on my fax. It's from someone who called me about a month ago asking about my charges and some other info. I emailed her my worksheet and contact info at the time, but just assumed she had found someone else in the interim. I plugged the info into the software and learned she will owe about $12K state & Fed. (She's in the middle of a separation, 3 small kids at home, decent income, but didn't bother to have much tax withheld on that $50K IRA she inherited and promptly spent) Naturally she was a little upset when I called her, especially since she doesn't have the money to pay. I gave her the options and told her we'd need to file the extension to get the FTF penalty off the table. I also asked if she & hubby had considered MFJ. His income was sort of low last year, which was part of the reason for spending the IRA money, along with the fact that much of it went to pay off his credit cards. She initially said "No way", but after I explained how it all works, she said she'd contact him. I got her permission to talk with him about her info, and urged her to have him call me. Hubby calls later, more than a little bit suspicious of me, especially when I explained that if she itemizes he will have to do the same on a MFS return, and he has almost no deductions. He didn't know this and just assumed he could file any way he wants and use the Std deduction. He assumed he had a refund and wasn't even planning to do anything about it today since somebody told him there's no penalty if you have a refund. He volunteers that he earned about $20K and only had $400 withheld. So now he's upset as well - not at me but at the IRS. So at least we're making progress. I'm thinking they might be able to save $3K - $4K combined on a MFJ return if some of my assumptions are right. After I explain all the pros & cons of MFJ vs MFS, etc (and maybe HOH for her - not sure about that one yet) - I dropped the bomb on him. "It sure would be a shame for the IRS to get that $2K - $3K when it would be much better spent on your kids." (I now, it's a shameless attempt at guilt, but it's also true folks). A few more phone calls go back & forth between them, and he finally calls back and asks me what's the best thing to do. I tell him I need to prepare an extension for him as well, we can get all our ducks in a row, and sort all this out a few weeks from now after they've given me all sorts of written permission to discuss the situation with one another, their lawyers, the IRS, my wife, you guys, and anybody else I choose to enlist if I need help. I point out that the separate extensions will preserve their right to file MFS if that's what they finally decide, but it also gives us the flexibility to file MFJ. In any case there will be no FTF penalty. I know it's a bad idea to get in the middle of these domestic situations and I usually shy away form them. And I don't fancy myself to be a marital counselor. But thanks to today being not so busy, plus the fact that those 3 kids are about the ages of my 3 grandsons, I just had to step up to the plate & do what I could. So their extensions are in the mail and I feel good about maybe having helped someone in a special way today. Nobody but my freinds on this forum could know or care about the financial train wreck that may have been avoided today by a few phone calls back & forth, but that's OK. Hopefully I won't be back here in a few weeks whining about no good deed going unpunished. Now I'm going to take my wife out to dinner & enjoy the evening. Hope all of you had a profitable tax season and if you're exhausted, please get some rest. (I may need to pick your brain in the next couple of weeks) Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted April 15, 2009 Report Share Posted April 15, 2009 John, Have a wonderful dinner and some quality time with your wife. I am DONE!!!, no extensions (yet), and am off to do the same. Take care! Terry D. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 15, 2009 Report Share Posted April 15, 2009 As I'm preparing extensions but took a break to read this board for a few minutes, what you said about separate extensions caught my attention. I have a new client who got married in December and figured he'd file MFS as would his wife, no kids; they've been together a long time and kept their taxes separate, of course, while single. But, it was looking like a nice savings MFJ; I don't have all her details yet. Similar to you, I urged them to extend so we can do a thorough comparison in a few weeks. Haven't e-filed their extensions yet (just starting those new clients who aren't in my system yet). Should I file an extension for each of them or one MFJ? Am I really committing them to a final filing status by how I file the extension(s)? Quote Link to comment Share on other sites More sharing options...
JohnH Posted April 15, 2009 Author Report Share Posted April 15, 2009 No, the way the extensions are filed doesn't commit them to anything. I just like to do separate extensions when there's ambiguity about how the final returns will be filed. It makes for easier back-tracking if an issue comes up later and you're trying to prove the extension was valid. (Plus, if they do ultimately file MFS, you can give each one of them a copy of their own extension without the other one's info folded into the withholding numbers.) Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 15, 2009 Report Share Posted April 15, 2009 That's what I was thinking, file separate extensions to have the paper trail for filing if they go with MFS and not share info. As long as they can still choose MFJ, which I thought and you confirm and who has time to look farther at 6 p.m. on the 15th!. Thanks for putting my nagging fears to rest. Quote Link to comment Share on other sites More sharing options...
jasdlm Posted April 16, 2009 Report Share Posted April 16, 2009 Nice work, JohnH. I'm glad you were able to at least show them some alternatives. (Hopefully they will take your advice.) Quote Link to comment Share on other sites More sharing options...
JohnH Posted October 16, 2009 Author Report Share Posted October 16, 2009 I just HAD to come back & post the follow-up to this little episode, just to show how stupid and self-centered some people can be. After I had time to reflect on all this & gather the data, it turns out the numbers were much more manageable - he owed about $2K as MFS and she owed $4K as HOH. On a joint return they owed slightly over $4K, for a net savings of just under $2K for him. When I explained it to her, she said she didn't mind paying a little extra even if he didn't step up to the plate for the taxes, because that might give him a chance to get his life on track and someday help out with the kids. She has the income to pay it off over time using an installment plan or loan. After stalling around for 6 months, this past Monday he came by my office to discuss the situation. He, being the smug know it all, decided he'd just file MFS because that way he can pay the $2K and HIS problems are over. He didn't want to be on the hook for any of the $4K on the joint return - he's way too smart to fall for that. Never mind the waste of money going down the governnment rat hole, never mind the fact that he can't even pay the $2K, never mind that she's the one with the good stready job while he flits from one job to another selling cars and making next to nothing. And never mind the kids - they're HER responsibility anyhow. If it isn't obvious by now, I DETEST people who won't support their kids, either by working or by helping care for them to enable the higher-income spouse to work. Only one good thing happened in all this. At least I had the satisfaction of seeing the expression on his face when I handed him back his W-2 forms and his extension forms, and told him I can't prepare his separate return (conflict of interest and all that, you know). "Oh, and don't forget you need to get it done by Thursday". End of rant - hope everyone had a good extension season. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted October 16, 2009 Report Share Posted October 16, 2009 I just HAD to come back & post the follow-up to this little episode, just to show how stupid and self-centered some people can be. After I had time to reflect on all this & gather the data, it turns out the numbers were much more manageable - he owed about $2K as MFS and she owed $4K as HOH. On a joint return they owed slightly over $4K, for a net savings of just under $2K for him. When I explained it to her, she said she didn't mind paying a little extra even if he didn't step up to the plate for the taxes, because that might give him a chance to get his life on track and someday help out with the kids. She has the income to pay it off over time using an installment plan or loan. After stalling around for 6 months, this past Monday he came by my office to discuss the situation. He, being the smug know it all, decided he'd just file MFS because that way he can pay the $2K and HIS problems are over. He didn't want to be on the hook for any of the $4K on the joint return - he's way too smart to fall for that. Never mind the waste of money going down the governnment rat hole, never mind the fact that he can't even pay the $2K, never mind that she's the one with the good stready job while he flits from one job to another selling cars and making next to nothing. And never mind the kids - they're HER responsibility anyhow. If it isn't obvious by now, I DETEST people who won't support their kids, either by working or by helping care for them to enable the higher-income spouse to work. Only one good thing happened in all this. At least I had the satisfaction of seeing the expression on his face when I handed him back his W-2 forms and his extension forms, and told him I can't prepare his separate return (conflict of interest and all that, you know). "Oh, and don't forget you need to get it done by Thursday". End of rant - hope everyone had a good extension season. WELL DONE!!! :D Quote Link to comment Share on other sites More sharing options...
Catherine Posted October 16, 2009 Report Share Posted October 16, 2009 Congratulations, JohnH!!! That must have really felt good -- handing him back his papers and showing him the door. Tee hee. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted October 16, 2009 Report Share Posted October 16, 2009 Congratulations, John! Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted October 16, 2009 Report Share Posted October 16, 2009 WAY TO GO, JOHN. Quote Link to comment Share on other sites More sharing options...
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