Last Warning… Extension Deadline is Friday

Last Warning… Extension Deadline is Friday

Over the past several weeks I’ve been providing last minute planning ideas for your 2020 returns on extension.  Today I will concentrate on the remaining details.

1. Electronic filing. Get the returns submitted (AFTER presenting the client with their final return for review AND they’ve signed their e-file documents) before midnight eastern time on the 15^th.

Note. E-filing reprieve! Download your e-file confirmations as soon as possible. If an e-filed return is rejected, you have five business days to correct the return and resubmit—the return will still be considered as timely filed (assuming a proper extension was filed back in May).\

2. Mailing in returns or payments. There are always circumstances when e-filing just isn’t going to work. If returns or payments need to be mailed in, I suggest you or your client take these items into their local post office before it closes on the 15^th and ask the clerk to hand cancel (don’t just drop it in the mail slot) the envelope so you can prove timely mailing.

Note. Mailing payments after the original due date (May 17 for example) will not remove failure to pay penalties since an extension is in time to file, not in time to pay.

3. Perhaps October 15 isn’t your clients extended due date. Consider your clients who are perhaps active duty military deployed in a combat zone or taxpayers who may have been victims of a natural disaster such as Hurricane Ida. These taxpayers are automatically provided additional time to file.
4. Do you have all the client data necessary to file? Many clients receive Schedules K-1 or 1099s well after the due date for issuing these items. If you are estimating that the client may owe tax, I suggest filing the return sooner than later, with an expectation of later filing amended returns once the tardy information is received. When amending, I would certainly explain the late receipt of necessary data as the reason for amending.

Note. Fear of filing amended returns? In my opinion this is unfounded. With the myriad of tax law changes and interpretations of law (as well as IRS guidance) occurring in the middle of filing seasons, amended filings are becoming a more normal course of business. While it is true that “human eyes” will review paper submitted amended returns and processing may take many months to complete, more recent returns (2019 and 2020 for example) are eligible to be e-filed when amended which may expedite the processing. As with any amended returns you may have filed in the past, even e-filed ones should be submitted with enough information and supporting documents to clearly explain to IRS why an amended return is being filed.

5. Do you anticipate the taxpayer is due a refund? In this case the due dates actually mean nothing. Your client has until the expiration of the statute of limitations (typically three years after the original due date) to file and not only will your client receive their refund, but the IRS will also pay them interest on top of the refund. I caution you however that in most cases filing a return after the statute of limitations has expired will leave your client empty handed. IRS will not issue refunds beyond the statute expiry.

Note. With the many due date changes initiated over the past several years it is advisable to review what the due date was for a late return being filed now as April 15 may not have been the original due date, and the statute of limitations may not have yet been reached. Also, since the collections statute is unlimited for returns never filed, filing a return after the statute of limitations has expired is still a wise move even though the taxpayer will not be issued refunds.

6. Owing tax is not a good reason for not filing. I think you all know the IRS is not going away. We have clients who fail to file because they anticipate taxes are owed. I suggest we advise these types of clients to file as the IRS has many tools to assist them with getting their “tax house” in order such as delayed payment arrangements, short term payment plans, installment payment programs and offers in compromise. The IRS has online tools to help taxpayers meet their obligations. However, the first step in having the IRS help is to get those returns filed sooner versus later.

Good luck with these final few days. We look forward to visiting with you virtually during Fall Tax School or during an upcoming webinar.

Stay thirsty for knowledge my friends.

By Tom O’Saben, EA