Boo! Extension season horror stories

What keeps you up at night? For many tax accountants, it’s the dream of not finishing all of your clients’ tax filing extensions by Oct. 15. Of course, there are solutions for this such as making sure clients abide by your deadlines, but you very well know there is always going to be that last client who let’s you know very late in the season that they aren’t ready to file.

We reached out to several members of the Intuit® Tax Council to tell us their best extension season horror story, so sit back and be prepared to be … amazed!

Nick Boscia, CPA, EA—Boscia & Boscia PC

A new client came to us after our internal Sept. 1 deadline, hoping we could still complete their business and personal tax returns by the Oct. 15 extension deadline. As we reviewed their comparative P&L statement and balance sheet, it became clear that the bookkeeping was riddled with errors, which raised concerns about the accuracy and ability of their bookkeeper. Things quickly spiraled when we realized that both their 2022 business and personal returns needed to be amended due to these bookkeeping mistakes.

The horror didn’t stop there. When we received their LLC formation documents, it became evident that they were required to file a partnership return, not a Schedule C as they had originally submitted. We had to rush order amendments to correct 2022 before we could even start their 2023 returns. Through countless late nights and with the deadline looming, we managed to amend 2022 and complete 2023 just in time. However, when we went to e-file the return on Oct. 14, disaster struck; the return was rejected due to identity theft, and the client was forced to mail in the return by Oct. 15.

Thanks to our quick thinking and perseverance, the client was still able to meet the deadline, though just barely. Despite the unexpected setbacks, we saved the day, and the client now loves our firm. This case was a powerful reminder that extensions delay the paperwork, but not the problems!

Editor’s note: Check out Nick’s accountant spotlight on the Intuit Tax Pro Center.

Louise Cochrane, CPA—L.F. Cochrane & Associates

As w were wrapping up an individual client’s tax return on Oct. 10, an investment of his, a K-1, went under. As I reviewed the K-1, I noticed it showed a beginning capital balance. I said to the client,”Strange, this K-1 has a beginning capital balance. How long have you had this investment?”

My client responded, “A total of three years.”

I responded, “OK, but I have no record of this investment before now. Can you get me those K-1s, please, and we will amend your returns?”

Client said, “Sure.”

I then realized there is another investment that I haven’t received K-1s for, and then realized that our custom tailored organizer spreadsheet we shared with the client has “N/As” entered by the client next to a few more brokerage accounts. I decided to test the client by asking, “Do you have 1099s for these accounts?”

Client said, “Yes, yes I do.”

It goes to say that no matter how many processes and checks I have, some clients are unaware of what they are doing and don’t provide everything that is needed to be in compliance. We are only as good as our clients are willing to collaborate. 2023 is complete and e-filed, and so are the amended 2022 and 2021 returns. The 2022 return owes the client close to $100,000 in refunds. Sigh ….  

Shahab Maslehati—Seed Money Consulting

I had a client who not only was in extension status, but didn’t file the prior year’s taxes. The reason for this was that while they were operating for some time—15 years as landscape architect—they finally decided to hire a bookkeeper who found reconciliation issues in the books. One thing led to another, and things came to head when the client’s daughter needed to apply for the FAFSA. This is when we met them.

When I got into the books and started helping clean them up, I found they filed their S Corporation returns wrong for the last five years. They never reported stock basis, which disallowed loss carry through to the personal returns. Long story short, I found about $60,000 in overpayment tax liability over the last three years.

The client went through all the emotions, and came to terms that we are better when we have the right resources in the right places. We can’t be experts at everything. We ended up filing amendments going back two years—thats where most of the write offs were—and filed in time for their daughter to complete her FAFSA.

Editor’s note: Check out Shahab’s accountant spotlight on the Intuit Tax Pro Center.

Tania Santos, EA—Platinum

I have this “newish” client that I was trying to bring in as a monthly engagement—but not anymore!

I kept telling them since February to please submit their P&L and balance sheet so I could get their S Corporation return started and help them with tax planning for 2024. The wife kept telling me that she was almost done with the books and would submit the reports soon.

Soon became March, and so I told her, OK look; if the reports are not ready, let’s just file an extension for both your S Corporation and personal tax. Perfect! That would give her some more time to work on the books.

May came around I kept calling asking for financials, then it was June, July … and very soon, August. I gave her a last chance to submit since I stopped taking clients for S Corporation prep in mid-August. I gave up and said OK, I guess they are just not filing.

On Friday Sept. 13, they submitted their financials, I reviewed them, and the balance sheet is full of (insert bad words here). 

I asked them to come in so I can explain that their financials were a horror, and the wife git extremely upset and said that she will fix it, but I knew that she had no idea what she was doing. I offered a bookkeeping cleaning, but the end of the story is that now they have ghosted me!

Editor’s note: Check out Tania’s accountant spotlight on the Intuit Tax Pro Center.

Tatiana Tsior, CPA—Linza Advisors

A client in the coaching industry isn’t happy with their preparer, who was not licensed. They showed me their separate!! tax returns for a husband and wife as single! Then, to add to the horror, the preparer added $200,000 worth of deductions to lower the tax burden, shifted four partnerships to the husband so he could “take all deductions,” and added the husband’s brother as a dependent on his tax return.