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Discussion:Corp extension or not?

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Discussion Forum Index --> Basic Tax Questions --> Corp extension or not?


Discussion Forum Index --> Tax Questions --> Corp extension or not?

Martinea (talk|edits) said:

16 March 2014
Two of my new small corps have fallen off the face of the earth.

Do I file an extension for them without their permission?

Is there a penalty for filing an extension in the event they went someplace else to have the returns filed?

Anarchrist (talk|edits) said:

17 March 2014
A couple years ago, Kip Dellinger stated:
"There is a 'liability' and it resides in the potential of unauthorized 'use' and 'disclosure' of the taxpayer's information under Sec. 7216 (criminal) or Sec. 6713 (civil) AND, where there is a pattern of filing 'unauthorized' extensions, OPR would be quite unhappy. These are more than adequate 'defenses' to some assertion of a liability if a CPA does not file an extension in the circumstances we address.
"Having spent about 8 hours with the Director and senior personnel the past two days, I believe that OPR and the Return Preparer Office believe that filing extensions without a specific understanding with the client is not permissible conduct."

Not sure if the govt's view has changed since then.

Ckenefick (talk|edits) said:

17 March 2014
Point is taken by Anarchrist.

What does "fallen off the face of the earth" mean? Emails get kicked back as undeliverable? Phone number is disconnected? Both? Or, is it just that these communications go through, but "clients" don't respond?

Southparkcpa (talk|edits) said:

17 March 2014
I , as a policy, never file extensions for clients who haven't communicated.

Jakescia (talk|edits) said:

17 March 2014
So....who would be damaged the greatest? (or the least, whichever):

1. the client....who for some unknown reason has not gotten into the office with projected data and a check/EFTPS (and maybe might not be intending on coming in)..........if an extension was filed, with even incorrect amounts--- read 0----.

2. The tax person.....who might be criticized for being over-zealous with his desire to protect the financial interests of a client, even though the status of that client might not be known as of the extension date.

3. The IRS........who might lose out on collecting a late filing penalty......even though the statute would not be extended if in fact the return had been filed.

I think it is of much greater importance to protect a client's interest by extending, even though in the interim he might have gone down the road to another preparer........where would be the damage to the client?

The biggest problem for the IRS is they might have to process a document that they might not have had to before, but one which is already set up to be "handled in the normal course".

Captcook (talk|edits) said:

17 March 2014
If I've not spoken with a client, I will generally send a letter informing them that due to lack of communication I am forced to consider any responsibility for their tax filings does not involve me. On a few occasions, the letter has compelled the client to respond. The others allow me to cover myself if they attempt to assert I should have filed an extension for them.

Ckenefick (talk|edits) said:

17 March 2014
Good points all the way around.

Ideally, we tackle this a bit earlier than 3/16 so we can contact the client by phone and/or mail and/or email with a communication that involves a negative response. That is, "Dear Deadbeat, corp tax returns are due on 3/17. I have not heard from you, so I will be unable to prepare your returns by the deadline. As such, if your returns have not already been prepared or extended, they will require an extension. If you would like me to extend your tax returns, please contact me by 3/10. Otherwise, I will assume that you will handle all required filings on your own."

Markb29 (talk|edits) said:

17 March 2014
chris - that sounds reasonable.

Jakescia - I have routinely extended under same theory. Unless I am disengaged, I assume still engaged....

Ckenefick (talk|edits) said:

17 March 2014
Jakescia - I have routinely extended under same theory. Unless I am disengaged, I assume still engaged....

That is how I do it as well, despite what OPR says. You are doing nothing other than trying to help the client out here.

But I will say, OP's client is a "new" client, which might change things.

Jakescia (talk|edits) said:

17 March 2014
Not a good deal to do things "willy nilly" (a new technical term I encountered the other day"........

I always try to leave a short memo in the file that "tried to contact so and so, etc etc so decided to protect his interests, and extended".

If I cannot find a valid (to me) reason for clearing the path for a taxpayer...........then......

screw 'em.

But, when in doubt, even for newbies.......the better part of valor, and all that....

Coddington (talk|edits) said:

17 March 2014
This is the type of issue that should be addressed explicitly in your engagement letter and in light of the rules of your state bar/board. It's also one of those "call your E&O carrier" situations. As ethics expert Kip Dellinger has recently publicly acknowledge, Circular 230 may not apply to return preparation. And TIGTA, last I checked, polices 6713 and 7216.

Ckenefick (talk|edits) said:

17 March 2014
I always send the EL out when I start the work, so if this OP client is new, there's likely not an EL on file.

Markb29 (talk|edits) said:

17 March 2014
sorry - no more calls to E&O carrier - got to get some work done.

Jakescia (talk|edits) said:

17 March 2014
sorry - no more calls to E&O carrier - got to get some work done.

Amen.

Fsteincpa (talk|edits) said:

17 March 2014
So, for states that impose a franchise tax, would you authorize an amount to be withdrawn?

Not sure I would do that. Luckily, most of my clients are around throughout the year so the worst instance is if they are on vacation. In those instances I've called them and sent in the extension and sent a business check from my account.

If it was some client that has been off the grid and they were new, well no, not a chance. While I can still get burned by a client, I doubt the ones I wrote checks for today would do that.

Ckenefick (talk|edits) said:

18 March 2014
So, for states that impose a franchise tax, would you authorize an amount to be withdrawn?

No way. In fact, I don't do any of that authorizing, whatsoever. That's the client's job, IMO. There is nothing good that can come from a mistake as far as I'm concerned.

Again, I get on extensions early. If there's a franchise tax balance due, the client will be mailed or e-mailed the extension forms along with filing/payment instructions. If it gets kicked back as undeliverable, then we make a phone call contact and tell them, "If I don't hear from you by such and such a time and day, you're on your own."

If the phone is disconnected too, then make a decision: File the extension with zeros to avoid late filing penalty (as best we can) or do nothing.

Coddington (talk|edits) said:

18 March 2014
I don't understand not having a signed engagement letter as part of the engagement acceptance process. That's like not asking for (and receiving) a deposit/retainer.

Ckenefick (talk|edits) said:

18 March 2014
That's like not asking for (and receiving) a deposit/retainer.

That's a good thing, right?

Ckenefick (talk|edits) said:

18 March 2014
FYI - My 1040 EL's go out with the organizers - "Dear Client." Corp ones go out when the returns are started, "Mr. Joe Blow, ABC Widgets, Inc.,"...these are individually addressed and I don't feel like spending time on them until then.

Nilodop (talk|edits) said:

18 March 2014
Sec 7216 is violated if ABC Widgets,Inc. is your client. I won't tell, though.

Ckenefick (talk|edits) said:

18 March 2014
You can find the name "ABC Widgets, Inc." online or in the white pages. But you tell me:

(1) discloses any information furnished to him for, or in connection with, the preparation of any such return, or

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