Extension payment bounced - now what?

[Catherine]

Client transferred money for direct debit of extension payment.  But there was some other bank confusion, and another big payment was taken just before the IRS request came in, so the extension payment bounced. 

Will the IRS try again, or should I send this client to Direct Pay?  We are still waiting for some final docs (from the same bozos who erroneously clawed back a payment, making the IRS debit bounce, grrr) so we can't finalize the returns yet.

[Lee B]

I don't believe the IRS will try again. Their automated system will send your client a letter  with a NSF penalty.

I think in this situation you need to be proactive and either you or your client needs to call the IRS,

explain the situation and ask them what would be the best payment option to resolve this snafu.

[Pacun]

I wouldn't get involved. It is not your fault and I would let them pay through the nose.

[PatHack]

The IRS is quick to send a letter to the taxpayer, usually the next day.  The IRS letter will tell the taxpayer to resubmit the payment via Direct Pay, EFTPS, credit/debit card online or check/money order.  The letter includes a payment voucher and address to send it to.

After the IRS computers process the tax return (1 to 6 months), the IRS may send another letter to the taxpayer with penalties and interest.  You may help the client by telling them about a first time abatement (FTA) for any penalty.  However, the interest cannot be abated.  The taxpayer should call the IRS to request the FTA or pay you to process a PoA form 2848, submit it to the IRS and then call the IRS and wait on hold....but usually that only make financial sense if the penalty is big and the taxpayer is too busy.

[JohnH]

Oh, the client is always too busy.  And it often doesn't make financial sense, which is why they will ask us to do it at no charge because they "don't like" paying penalties.   Of course, they also don't like hearing us say WE don't like being asked to fix everybody else's problems for free. Rather than work for free, I'd rather just take the time off.

[ILLMAS]

17 hours ago, JohnH said:

Oh, the client is always too busy.  And it often doesn't make financial sense, which is why they will ask us to do it at no charge because they "don't like" paying penalties.   Of course, they also don't like hearing us say WE don't like being asked to fix everybody else's problems for free. Rather than work for free, I'd rather just take the time off.

I hate it when a client is always busy, but close to April 15 they call expecting you not to be busy and prepare their tax return WT#

[rscpa]

And that is why I have the client pay the tax and not have anything to do with it.  One of my largest clients had me make the payment.  The payment didn't go thru because the date was incorrect for taking the payment as it was on the weekend and so it never got paid.  Client didn't notice until two months after.  He had me pay the penalties.... never again.    This was the first year it was offered via the software....

[Jack from Ohio]

The check bouncing is a matter between the client and his/her bank.  You have no part in this.  You should have related this to your client right away.

Now the client has you wrapped up in the middle of HIS/HER problem.  Tell them so, and back away...

You are NOT responsible for their checking account and/or balances. PERIOD.