Helping Clients File for a Tax Extension

When your clients cannot submit all of the information required to file their taxes or they try to make an appointment at the last minute before the deadline for filing arrives, your best option is encourage them to file a tax extension. You should explain that they can come to your office and you will prepare the late filing paperwork for them.

You can help your clients by explaining what an extension is and how it will benefit them. First, explain that filing the tax extension form will give them up to six months to file their return. The IRS does not care what the reason is as long as the form is filed by the April 15 tax deadline. If taxes are not filed or an extension is not requested, explain to them that they will be required to pay a penalty of five percent of the total amount of tax due for each month that the return is not filed, up to a maximum of 25 percent. It should be noted that if your client's tax return is more than 60 days late and a tax extension has not been filed, the penalty will be a minimum of $135 or the amount of the tax due, whichever is less.

Clients should be informed that, although a tax extension gives them a six-month period to file their taxes, that extension does not apply to any taxes that may be owed to the IRS. You should encourage them to help you come up with an estimate of the taxes owed and to pay all or a portion of that amount along with their request for a tax extension. Failure to pay the total amount of taxes due by April 15 will result in interest charges and a monthly penalty of one-half percent of the amount due. The penalty cannot exceed 25 percent of the amount of unpaid taxes.

If your client cannot afford to pay the estimated taxes due by the tax deadline, you should explain that they should still file for a tax extension. The penalties for late filing are higher than the penalties for not paying the total tax due on time.

Depending on the state where the client lives and/or works, you may also need to assist your client in filing a state and/or local tax extension request at the same time that you file an IRS tax extension. Some states will accept an IRS extension request while others require the use of specific state forms.

The primary benefit of helping your client file an extension is twofold. First, the client avoids interest and penalties. Second, you will benefit by having the time you need to gather any additional information that may be required and to ensure that your client's tax forms are accurate. It is better to assist your client in filing an extension than it is to amend their return later.

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