Given the number of changes due to the Tax Cuts and Jobs Act, there’s no doubt many tax pros put their clients on business and individual extensions. We asked several of our Intuit® Tax Pro Center authors and members of the ProConnect™ Tax Customer Council for feedback on the hot buttons related to extension season. Here’s what they had to say.
Renee Daggett, EA, AdminBooks
In addition to some clients getting easily overwhelmed with the document collection process and needing the extra time to not feel rushed, we also find that some clients want to file an extension to “buy time” to fund a retirement account. However, no matter what the reason for extending a return, some clients are fearful of a balance owed, not realizing that filing an extension does not give them additional time to pay.
Whatever their reason, it is our job to maintain contact with these client during the extension period to keep them motivated to complete the filing process well in advance of the extension deadline. Our goal is to make the collection process easier by providing a checklist, online portal to drag and drop documents, and a fill-in organizer. Telling them to invest one hour gathering the docs and completing the organizer the best they can makes the daunting task – created bigger in their head – more doable and easier than they expected!
Reflecting on the tax filings put on extension this year, I am reminded of a seminal word in the vocabulary of business: “why?” The reason for an extension must be evaluated, so if the “why” is attributed to the ambiguities of tax reform and anticipated extenders, the question is whether extensions were really necessary or merely used to justify procrastination.
If the reason is the latter, then it’s time to tighten up your policies and procedures. However, if the reason is related to your clients who are always on extension, they must be divided into three groups:
- Clients who have complex tax situations requiring additional time to address or additional documentation unavailable by the filing due date; these are appropriate reasons to extend.
- Clients who find themselves periodically remiss; if this isn’t a chronic issue, then this, too, is appropriate.
- Clients who are non-responsive or provide minimum information because they always procrastinate. These are the ones who should be evaluated for termination! They consume your time, and provide woefully inaccurate and incomplete information. Not only are they generally unprofitable, they engender unreasonable professional risk and liability.
When looking to tighten internal policies and procedures and clear out nominal clients, an evaluation of clients on extension is a great place to start.
Andrea M. Parness, CPA, CTC, A. Parness Company CPA
Although we worked hard to learn the new law and inform our clients about the changes, we still had many returns that were either filed at the last minute or placed on extension. As a result, here were our top issues:
- We reviewed, discussed and challenged several K-1s provided by other accounting firms.
- We reviewed and discussed foreign income repatriation information with our clients to seek further clarification from the issuing accounting firms. I put those tax returns on extension to enable us to confirm final amounts and work on these more complex returns when we were not under as much pressure.
- As in prior years, we placed several corporation and individual tax returns on extension to give our clients additional time to fund retirement plans.
- As a New York State CPA firm, we were already used to attaching supporting documents to e-file returns. This year there are more, and some elections require the client’s signature prior to attachment.
Overall, our tax return process structure really helped us get through this season with minimal stress, overtime hours and fewer extensions than we originally anticipated. Of course, we reviewed and updated our processes and checklists to incorporate any necessary changes.
Christopher J. Picciurro, CPA/PFS, MBA, ARA, Integrated CPA Group
I feel the top issue is clients feeling comfortable that “extension” is not a four-letter word. For many taxpayers, an extension is taboo and carries a negative connotation. We work to educate our clients that an extension provides many benefits, including:
- Providing additional time to contribute to their SEP or defined benefit plans.
- Giving clients a clearer understanding of their current year tax situation and potential application of prior year tax overpayments to current year estimates.
- Committing our undivided attention to each return.
- Providing longer tax election time frames, in certain cases.
- Communicating the importance of tax planning, consulting and advising, away from transactional work.
- Providing the taxpayer additional time to organize information and find deductions, thereby lowering their taxes!
- Giving us more time to conduct cost segregation studies on real estate investments.
Extensions are easily granted for a reason and should be used by taxpayers when appropriate. Taxpayers need to trust their tax professional when making a decision to extend a return.