How to Advise Clients Regarding Extension Filing

If you prepare corporate returns, the filing deadline is March 16, 2020, and the April 15 deadline for filing individual returns isn’t far behind. This filing season is the most complex and unique, with just about every taxpayer being impacted by the Tax Cuts and Jobs Act.

You are probably working more hours than normal trying to prepare tax returns, and in some situations, spending more time explaining the return to your client than the time it takes to prepare it. Unfortunately, this is what Congress created for those of us in the tax preparation business. Yet, with the tax deadlines quickly approaching, how will you advise your clients that you need to file an extension?

While preparing the extension in Intuit® ProConnect™ Tax Online, Lacerte® or ProSeries® may not be difficult or time consuming, there is much to consider that will help streamline the extension process and spare you from insanity.

1. How soon do you begin reaching out to your clients about filing an extension? You may not begin preparing and filing extensions until a day or two before each tax deadline, but should you wait until the last minute to reach out to your clients and put them on notice that you need to file an extension? The sooner you begin to talk to them, the better off you will be. Often, clients who have been with you for a number of years assume you will file an extension even if you don’t hear from them. The problem with this is that on the extension deadline day or the day after, you run the risk of being inundated with emails and phone calls with clients asking if you filed their extension. You don’t hear from them the entire tax season, but somehow they suddenly remember to check in for their extension.
2. How should you communicate with your clients when it comes to filing their extension? With so much technology at our disposal, there are several options to communicate with clients. I can tell you this much: if you aren’t willing to change and adapt to new technologies, you will be left behind. No matter the age of your clients, they are all resourceful and use various technologies – and you should, too. How you communicate is your choice, but consider email, phone, text and video chat. I use all these methods, and they work well. However, the choice is really up to the client; those who are outside our borders may prefer to video chat, for example. Consider setting up a VoIP phone system that provides a multitude of uses, including phone calls, text, fax and video chat.
3. Why should you let clients know that you will file their extension electronically? One of the big questions that clients always ask is whether they can they file their own extension. The simple answer is no! Imagine letting your client file their own extension, and three months later you file their tax return. Then, they receive a letter from the IRS with late filing penalties. What a mess ….
4. Should you charge a fee to file the extension? Whether you charge a fee to file an extension is solely at your discretion; however. I encourage you to tell them about an extension fee in advance. I’m a firm believer is disclosing fees up front because it can mitigate problems with clients. Your time is worth money, and there is nothing wrong with charging to file an extension, but you should also provide the perceived value to your clients.
5. How will you handle the aftermath of extension filings? The extension deadline is like an exhausting one-day party. You spend a lot of time preparing for the party, trying to make it perfect and please your guests, and then in the aftermath, you have to clean up. Extension filing is no different. Remember that most people are fearful of the IRS, so it’s not that your clients don’t trust you to file their extension; it’s more about wanting comfort and peace of mind that their extension was accepted by the IRS. You should consider implementing a policy on how you will communicate with your clients after the tax deadline. Perhaps tell them that you will email or call them if, for some reason, their extension gets rejected. If they don’t hear from you, it means it’s been accepted. It’s just like the old saying: no news is good news.

While we are just days away from the corporate extension deadline and four weeks out from the personal extension filings, the days go by quickly. There will likely be more extensions this year than previous years, so start planning early to minimize the headaches and stress.

Editor’s note: For more information about extensions, read this recent article by Fredric D. Leffler, CPA, MBA. This article was originally published March 12, 2019, and updated on March 2, 2020.