Discussion:Tax penalties - underpayment of tax
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Discussion Forum Index --> Tax Questions --> Tax penalties - underpayment of tax
| 30 January 2007 | |
| The 1099 non filing thread caused me to think of this. When a client is in an underpayment penalty situation I never include it on the tax return. I give the client a copy of the 2210 and associated state version and let them know that they may receive a notice from the IRS that they may have to pay. But I will never voluntarily have my clients pay that with the return.
I have seen many new clients that have had their previous preparer's include the penalty amount in the return and I always thought it wrong. Wondering what the thoughts are on this. | |
Death&Taxes (talk|edits) said: | 30 January 2007 |
| I said it in an earlier discussion with you and Deb: I would only use your course with clients who some tax know-how. The IRS penalty notice says 'Mistake' and next thing, the phone rings. You can explain all you want that the penalty is in reality an interest charge for using Sam's money, they will never listen. I have different procedures for annualization cases, but that is another story. | |
| 30 January 2007 | |
| For years we followed a policy of not volunteering the penalty; rationalizing that we shouldn't have to do the IRS's work for them or hoping they might not catch it. But after some point in time we noticed that the assessment rate for our clients was almost 100% so, we've gotten into the habit of volunteering the penalty in order to avoid the inevitable phone call from our client about the notice. As a practice pointer we're keeping close tabs on the estimates for the clients that need to so the issue typically only arises for our new clients. | |
| January 30, 2007 | |
| I used to leave it off as well FStein, but decided I hate the phone calls in June due to the IRS notices. | |
Bottom Line (talk|edits) said: | 30 January 2007 |
| I include it. If the TP mails the return in a timely manner, the penalty is correct and they don't get a "nasty gram". No IRS letter means no telephone call to me! | |
| 30 January 2007 | |
| I also include it, because most of my clients tend to "forget" that I told them that they would get a bill from IRS for late pay/filing. ANY letter from the IRS brings instant panic and urgent phone calls. | |
| 30 January 2007 | |
| See that, you people make some very valid points. Again, my thought process is from a 100 tax return per year deal. I was never one to work 50 to 70 hours <until this year anyhow, lol>. I can see the issue when I have 700+ returns as I do. And I do assess my clients mettle for receiving IRS notices without being scared SXXtless so to say. I also include the 2210 in the client file on top so that they know.
I think that for this year, I will keep a separate file of the 2210's that aren't included so that when my year round full time bookkeeper <i do enjoy having staff now> get's the phone call, she can look in the file, see if it's the same amount and she can tell them to just go ahead and pay. If it does look like it is almost 100% as has been said, then I think I will agree and then include the penalty amount in the future. Client here, gotta go. | |
