Had a client drop off their tax info:
$365k 401k withdrawal ($73k Federal w/h and $1300 in CA FTB w/h)
W-2 for $122k (went exempt for the year)
Anyone ever have anything like this happen to them? Once a year client, so I had no idea this was coming.
Obvious answer is that they need to pay. File extension and/or any other thoughts?
Seen it too many times, people are dumb.
Get the return filed on time. Have them send what they can before 4/15, then once the return gets processed and IRS sends a bill, they can call IRS or create an Online IRS account and set up a payment plan.
Options :
1) File the returns without paying; the IRS & CA will shortly send letters - "HEY, where's the money"?
At that stage, the authorities can be contacted to set up an plan for installment payments.
2) File an extension showing the amounts due, but don't send any money (or, send some money?). THEN, the letters from the IRS & CA don't show up until after the returns are actually filed. Actually, the CA extension is automatic if no money is being sent ** .
HOWEVER @Dusty2 is correct, late payment penalties and interest continue to accrue until full payment is made. Make sure your client understands that 'minor' detail.
It is 'critical' to either file the return, or the extensions so that late filing penalties are off the table.
**Personally, I would send some $$$ to CA, to prove the extension.... I don't like relying on that 'automatic if no money sent' clause. But I do have OCD issues 😉
Presumably they are expecting free advice from you so you are asking for some free advice from us.
Please introduce us to your client. Owns a home? How much equity? What credit score? This could be a simple matter. Have you asked, what they were thinking? Maybe Stage 4 cancer and they are living like there's no tomorrow, because there isn't?
Favorite client (I mainly interacted with her but not as much the last two years) went against my advice re: drawing down retirement funds, taking a HELOC out on primary home to do major remodel on 2nd home.
Fast forward to early February 2024; husband comes into the office. She died three days before from the recurrence of breast cancer and had been battling it for the last two years. She didn't want 'anyone' to know. Remodeling that 2nd home in the Wine County, where she wanted to die and did die, with the help of hospice, was important to her.
So yep, the back story is important. It's not always about the taxes....
Appreciate all the great replies!!
Client going through a messy divorce, now filing H of H, and needed $$$ to pay back creditors or risk losing home.
About $400k equity, so OIC is out of the question.
You have clicked a link to a site outside of the Intuit Accountants Community. By clicking "Continue", you will leave the community and be taken to that site instead.