JohnH

The main problem is trusting that the financial advisor knows what they are doing. (most don't) Everything else falls under the heading of "Inevitable Consequences"

And, of course, a bill for $180 for preparing the amended return to claim the $150 refund...

When I converted, I manually entered everything into Drake. It went fairly smoothly, but I didn't have an unusually large number of carry forwards or complex depreciation schedules. I'm sure that would make a difference. I made the switch at the beginning of tax season due to the ATX meltdown. If I had been able to choose, I would have switched at this time of year and then prepare my extension returns using Drake. I think I recall that Drake opens up the current year for full filing during the extension period for evaluators and (of course) new customers.

It's possible that I may have encountered it. But I don't know for sure because I always delete unexpected inquiries for tax preparation services as soon as I see what they are. Nobody is going to request tax preparation out of the blue via email.

I guess I had forgotten that ATX had an deficiency in this area. Drake's basic package handles it flawlessly, at least for the states I prepare. I still double-check multi-state calculations ( probably a holdover from doing it all manually back in my ATX days. How soon we forget)

I just want to be sure I understand this correctly. Does this mean that after paying $1,500 for MAX, it is now necessary for their customers to pay more just to get the software to calculate the credit for tax paid to other states when a taxpayer has a multi-state return? And that this functionality existed during the regular season but they are taking it away during the extension period for the same year?

Haven't yet decided if I'll go in to the office on the 18th. Will definitely sleep in though, since all my extensions are already filed. Plus, I brought some write-up work home with me just in case I decide to stick around the house on Monday I did get a phone call on Saturday on my voice mail from a problem client of a few years ago. Fortunately she didn't leave a message and I'm hoping for her sake she gave in and spent some time at an HRB office over the weekend. If not, then if she reaches me on Monday that will still be my advice to her.

Even better, get them off the phone altogether. Migrate them over to email and texting. It forces them to be more precise and frees you up to address their questions when most convenient for you - in some cases during the 15 minutes between finishing one big project and before turning to the next. I return phone callls by the next business day. But I reply to emails and texts almost immediately. Sometimes the response is simply "I'll look into it and get back to you", but it satisfies the client to know I'm on it.

The coffee machine makes me recall something that happened many years ago when I was the young controller for a small ink manufacturing company. True story here: This was long before the days of cell phones - we had nothing but land lines. I lived about 20 minutes from the plant and the owner (Jack) live about 30 minutes away. We had a bookkeeper (Ginger) who was always the first person to work. Ginger was very talkative and always in a high state of excitement even on normal days. One morning as I arrived, Ginger met me at the door, very agitated because we'd had a break-in the night before. They took calculators, typewriters, petty cash from the vending area, etc. (didn't have computers at that time). She told me she had already called Jack at home, and she was especially upset because the only thing he seemed concerned about was the coffee pot. Jack arrived soon afterward, and we spent most of the day filing police reports, buying new office equipment, notifying our insurance company, and arranging for some security enhancements. When things settled down and Jack & I were sitting in his office reviewing the day's events, I told him I was puzzled over Ginger's comment about his concern over the coffee pot. He said -> "I knew you were probably on the way in and you'd take care of things. But I couldn't get Ginger off the phone so I could shower, get dressed, and come on in as well. She just kept telling me over & over again what all had been taken and yelling 'They took everything! Everything!'. So I finally asked her if they took the COFFEE POT. She said 'No, why?' I said 'Well make some #$%^% coffee and I'll be there in a half hour!' She needed something to do and I figured that would keep her occupied until you got in."

Absolutely they should be responsible for any interest and FTP penalties. Don't accept any responsibility for their procrastination. Personally, I'd give them an option. I'd estimate the tax liability based on a worst-case scenario (the entire amount taxed at ordinary income rates). Then explain to them that this is a high-side estimate - it may be lower or it may not, and they brought it in so late that there isn't sufficient time to research it. With the understanding that they will get a refund of any overpayment, and that they will owe a combined interest and FTP penalty of roughly 1% per month (plus estimated tax penalty if any), let them decide whether to send a payment with the extension. Also, keep in mind that the NC FTP penalty is a flat 10% of the tax due, plus 1/2 of 1% per month. I'd make it clear that if they choose to pay less than the high-side estimate, ALL penalties & interest are their responsibility. Make it harsh and crystal clear - this is no time to soft-pedal the potential end result. This should probably be in writing. If they don't agree, hand their stuff back and wish them good luck. They still have the weekend to sit in an HRB office somewhere for a few hours and likely end up with the same result.

You gave up too soon. Unless there are important facts you are not telling us, you had the facts and IRS Notice 97-26 on your side. If there was any significant amount of money at stake, you still have work to do.

Xxx

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..

Thank you very much. This simplifies things considerably. I think I got the more useful help in this particular trade-off. But there will be other opportunities.

Maybe someone with New York experience can help me out here. A student who is a resident of SC and is still a dependent on his parents' tax return did a summer photography "internship" in New York over a 3-week period. It wasn't academically related, I think the company just used that word to justify not paying him very much for part-time work. They paid him $2,800 as an independent contractor. He incurred about $1,500 of work-related costs in earning the $2,800. So with $2,800 in gross receipts and a net of $1,300 on schedule C, is he required to file a NY return? Did I provide enough info to answer the question?

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.

Tell her she should call them on the phone to let them know about the 401(k). After a couple of hours on hold, she can point it out to whoever answers. I'm sure their response will be "Oh yes, now we see it. We had been waiting for you to contact us. Thanks so much for calling that to our attention."

Don't take the fun out of opening envelopes. Most of my clients mail their stuff in or drop it in my night drop, but there are a few that still insist on dropping it off and handing their stuff to me a piece at a time. Pulling the important piece of paper out and simultaneously cramming the boilerplate and envelope directly into the shredder is the highlight of the appointment. The expression on their face while that shredder is grinding away is priceless.

Haven't lost yet. You don't lose when you do it right. When I start losing, I will change (or retire).

Great one!

While we are thinking about that issue, can someone explain the logic behind the following article to me? I would swear I thought it was illegal to "share" someone's social security number. Or maybe that only applies to legal citizens?... http://www.forbes.com/sites/robertwood/2016/04/13/irs-admits-it-encourages-illegals-to-steal-social-security-numbers-for-taxes/#3304b59d237a

You don't have any obligation to the lender. You certainly shouldn't sign anything for the lender, nor should you waste your time telling the lender how to do their job. Give the client a 1040X with the Schedule E address correction attached, and an explanation on the 1040X that there is not change to the return other than the address correction on the Schedule E. There is a place on the 1040X just for that sort of explanation. It could be as simple as "This filing reflects no change to tax liabilities. However, upon review we discovered that an incorrect address was shown on the original Schedule E. The attached Schedule E reflects the correct address." The client can furnish the 1040X and corrected Schedule E to the lender if he so chooses. Whether or not the client files the 1040X is irrelevant. Whether or not the lender accepts this is also irrelevant insofar as you are concerned.

The most recent one was an 1120S for the 2012 year. Return was filed (on extension) on 9/13/13 and received by IRS on 9/23/13. They tried to assess a $195 penalty for it being one month late. They were not questioning the extension in this case; they were only questioning the filing date. But the principle is the same - what constitutes timely filing? We had Certified Mail & Return receipt, which I sent along with a printout from the Post Office of the tracking info on 12/5/2013. On 12/26/2013 they sent a denial letter saying the return was filed on 9/23/13 and thus it was late. I responded to that letter with copies of the original info again, along with a printout of IRS Notice 97-26. It clearly states that timely mailing is timely filing. I did ask them to let me know if there had been any change to the filing requirements. The issue was not resolved until April, 2014, but they finally relented. None of the above is intended to say it isn't a good idea to filed the extensions electronically. I think that is a good practice for all you e-flingers. My point was simply to emphasize that if one does mail an extension with a balance due expected (whether or not any payment accompanies the extension request), it is worth the extra cost to use certified mail with return receipt. I prefer USPS to any other means of delivery, even though the IRS does recognize the other PDS's provided the correct level of service is used. In any event, dropping an extension in the mail via First Class Mail is extremely risky & leave you with virtually no way to demonstrate timely filing. And until IRS Notice 97-26 is revised, it is the job of the IRS to honor it even if some of their employees don't understand and have to be pressured to apply their own rules properly.

I've only had a few questions arise over the years regarding a missing extension. But every time we provided IRS with a certified mail receipt and green return card, along with a copy of the canceled check, the extension was acknowledged. I've heard the arguments that "proof of filing doesn't prove anything was in the envelope", but apparently IRS doesn't see it that way. I'm not saying that some uninformed IRS person on the phone hasn't made such a claim, but it just isn't the reality when you get down to the facts. However, there's no doubt that e-flinging the extension is certainly another level of protection.

I didn't know you could even be required to have road block insurance.