Failure to File

[ILLMAS]

Two clients of mine received a CP14 notice for a failure to file, extension was submitted on time and return was submitted before 10/15/13, anyone knows if there is a error with the IRS automated system?

[Mr. Pencil]

if there is a error with the IRS automated system?

The IRS doesn't even claim to be accurate about these things, so it's become just an ordinary part of our business. Simply respond following the instructions in the letter exactly. Include your ACKS, or proof of manual filing.

[Jack from Ohio]

Two clients of mine received a CP14 notice for a failure to file, extension was submitted on time and return was submitted before 10/15/13, anyone knows if there is a error with the IRS automated system?

The IRS doesn't even claim to be accurate about these things, so it's become just an ordinary part of our business. Simply respond following the instructions in the letter exactly. Include your ACKS, or proof of manual filing.

You will find that nothing short of electronic acknowledgment will be accepted. Not even certified mail. We have had three rejected so far. One had certified receipt, the other 2 mailed theirs in. IRS denied all 3.

[JohnH]

We're going to test that theory in my office. Client had a valid extension and mailed his paper 1120S via Certified Mail with return receipt on 9/13/13. IRS received it on 9/23/13 and the return receipt card came back a few days later. This week he received a CP162 for late filing, assessing a one-month penalty.

We're sending them a copy of the green RR card, along with the printout from the US Post Office tomorrow.

The printout gives the complete history of the mailing.

I'll report back on whether they accept our documentation.

But if he had not used Certified Mail with Return Receipt, I would't even have bothered to ask for removal of the penalty.

[Jack from Ohio]

We're going to test that theory in my office. Client had a valid extension and mailed his paper 1120S via Certified Mail with return receipt on 9/13/13. IRS received it on 9/23/13 and the return receipt card came back a few days later. This week he received a CP162 for late filing, assessing a one-month penalty.

We're sending them a copy of the green RR card, along with the printout from the US Post Office tomorrow.

The printout gives the complete history of the mailing.

I'll report back on whether they accept our documentation.

But if he had not used Certified Mail with Return Receipt, I would't even have bothered to ask for removal of the penalty.

Has not worked for us. Please let us know. The regs do not require a taxpayer to prove delivery of the extension, yet the IRS enforces it that way.

[JohnH]

I'll definitely do that. I've only had a few of these over the years (maybe less than a dozen) and have always been able to get them removed when certified mail with RR was used, but I understand we're in a whole new ball game with IRS and penalties these days.

[Guest Taxed]

I had a client in CA who got failure to file for a 1065 that was on extension. The 1065 was paper filed using first class mail, so no receipts.

The response letter included a copy of the 1065 and a copy of the form 1040 with K1 showing that the K1s were issued timely and 1040 included the income.

IRS abated all penalties.

[SaraEA]

I too had a client who got a failure to file penalty over the weekend. This client mailed his extension (no return receipt that I know of), so this doesn't bode well. The only reason we didn't efile the federal is that the state he lives in requires payment with the extension request, payment was due the state (but not the federal), and there wasn't enough time to efile the state and have the payment taken out in a timely manner. I figured as long as he had to mail the state might as well mail the federal. Big mistake from what I'm hearing here.

Like Taxed, we have had multiple clients who mailed in partnership extensions and partnership returns who got dinged with penalties. There were enough of them, in fact, that we now efile all partnerships and add the extra software fees to their bills. Again, though, the only reason we had the clients mail these is that the state they were in didn't support efile of 1065s, so we just did the whole package on paper. Not anymore.

[Jack from Ohio]

Clients who do things like want extensions on April 14-15, and to file returns on October 14-15 get no sympathy from me, and I tell them so. These are the ones that always get the notices like this.

The calendar has not changed and I grow weary of babysitting. Oh, their fees increase substantially as well.

"Lack of proper planning on your part does not create an emergency situation on mine."

[jshtax]

"Lack of proper planning on your part does not create an emergency situation on mine."

May I use this line? How much are your royalties?

[Jack from Ohio]

May I use this line? How much are your royalties?

Print it properly, and display it proudly.

I wish I could take credit for it, but I saw a sign like it somewhere.

[Guest Taxed]

In my opinion the taxpayer needs to demonstrate to the IRS in their response that 1065 was paper filed (no receipt to prove mailing) and that K1s were issued and that K1 income or loss was accounted for in the timely filing of the 1040. I mean 1065 is really "information only", the taxation happens at the 1040 level. Once you make that contention I think the chances of getting the late filing penalty abated are much improved.

[MsTabbyKats]

Clients who do things like want extensions on April 14-15, and to file returns on October 14-15 get no sympathy from me, and I tell them so. These are the ones that always get the notices like this.

The calendar has not changed and I grow weary of babysitting. Oh, their fees increase substantially as well.

"Lack of proper planning on your part does not create an emergency situation on mine."

And it's always the same people.........

My motto is either "I've been sitting here since January"

[Guest Taxed]

Yes typically it is the same people who are late and it i sup to us to put up with it or show them the door if you don't like it.

Here what we fail to realize. If you let them do this year after year, even if you charge more and they pay, you will NOT see any change in behavior. So don't expect any change. As my guidance counselor used to say "You are an enabler"!

[JohnH]

I agree with Taxed, and I enjoy being an enabler. I like those people who want extensions. They enable me to accept more work than I would be able to accomplish between Feb - Apr without working myself to exhaustion. So I see them as revenue enhancers. Sure, some of them continue to procrastinate, and they take more time to manage, but as long as they're willing to pay the extra charges for dealing with them, I'm happy to do their work.

Billable time is billable time - no matter whether I'm preparing a return or following up with them to get the remaining info. Now I suppose if I locked myself into a rigid fixed fee schedule based on the number of forms on the return, I'd feel a little differently. But even in that case, there's always the option to add a line for "Additional Services" related to filing the extension, chasing them down for info, etc. Some people don't respect your time - charge them for it anyhow. They will either make it worth your while or they will go away. Either way you win.

[Guest Taxed]

Sure if that business model works for you and you enjoy it, go for it.

I like to take a little break after the regular tax season.

[jshtax]

Sure if that business model works for you and you enjoy it, go for it.

I like to take a little break after the regular tax season.

I do not mind extensions but I try not to do any returns from April 15 to 2nd week of May.

[JohnH]

That's pretty much what I do. I set an early cutoff date - everything coming in after around mid-Mar automatically goes on extension. Some of those (the simple ones) get out the door by Apr 15, but most don't.

That makes Apr 15 a light-duty day for me. Mostly a time to review & cross-check extension filings (and maybe extend a last-minute procrastinator if I'm in the mood, although I'm usually not). Then take my wife out to a relaxed dinner early on the evening of the 15th - this has been a private ritual we've followed for years.

On the 16th I sometimes amuse myself (with a tiny amount of compassion) by reading all the panicky posts from last night's forums regarding failed ACK's, computer failures, server logjams, and other crises -> the majority of which were a predictable result of failure to plan properly back in March.

I usually take the following week off to go somewhere nice, then come back to finish up lingering payroll tax reports by Apr 30. Beginning in early-to-mid May, I turn my attention back to 1040's.

[joanmcq]

Yep, that's about my MO too. And now I have a new client that runs their main event around April 24 and we'll be on site doing the books, recording cash as it comes in. So I won't get to doing extensions until sometime in May. I used to disappear to somewhere like Death Valley, away from any cell reception (and away from people) for a week or two. It was sweet!