Why more clients are filing for tax extensions
Give some people time and invariably they'll want more.
In recent tax years, some 12 million filers opted for a Form 4868 to buy another six months to file their return (though not to pay their owed tax, as some taxpayers must learn). According to a National Society of Accountants survey, the fee for filing a clients' extension averaged $41.59 – though two of out three preparers don't charge it.
"I have more extensions to do this year than ever," said Enrolled Agent Jeffrey Schneider, in Port St. Lucie, Fla. "Some of my clients are always extended, but I had many new clients that needed to extend."
Steven Weil, an EA at RMS Accounting in Fort Lauderdale, Fla., said his extensions load was about average going into this off season. "We're finding that late receipt by clients of 1099s and, worse yet, corrected 1099s has made many gun-shy about keeping those early appointments at the beginning of the season," Weil said.
Karen Durda, an EA and president of Century Accounting and Tax Services in Wilmington, N.C., said her firm had prepared 96 extensions "and we will more than likely get more returns to prepare come September and October for those who [self] filed. We have also already prepared some of the returns that came in and we could not complete due to late arrival of 1099s or health-care forms. This is higher than normal for my firm."
Some preparers report that extensions were actually down going into this off-season.
"I hit a peak high last year and am down slightly," said Laurie Ziegler, an EA at Sass Accounting in Saukville, Wis. "I don't want a lot of extensions, as I have a year-round accounting/payroll QuickBooks practice that's very successful."
"We have about half as many extensions this year as last," said Terri Ryman, an EA at Southwest Tax & Accounting in Elkhart, Kansas. "I attribute it to an employee stepping up and working Saturdays with me. And [in many cases] the extensions were done but the client never came back in to pick it up and pay us."
Ideally, taxpayers take extensions to learn about credits and deductions – or to find a preparer.
PROBLEMS - AND SOLUTIONS
With year-round communication with clients, you can head off a load of next tax day's extensions.
"My extensions are right on target," said Eva Rosenberg, an EA, blogger and author of Small Business Taxes Made Easy and Deduct Everything! "We have established solid lines of communications with our clients – we know which ones we can finish by April. And all the business returns go on extension so we can optimize tax benefits."
Rosenberg did put one client who was buying a new home on extension, "even though his return was totally ready, so we could use the new address on the return."
Extensions can also bring a benefit at a time of year when your practice needs it, said EA Twila Midwood of Advanced Tax Centre in Rockledge, Fla. "The revenue from extensions does help with cash flow after April 15."