Several years Block has been filing my returns.....Own nothing...I have a small Trust fund...23,000...@008 filing fee was $85...2009 filing fee $192...both simple, no deductions...Schedule K from the Trust Bank....Then I filed 2007 return with amended Schedule K1 on 8/10/10.....same info no deductions..$335......The preparer said it was because it was a schedule K1......BALONEY....It was because they had me over a barrel as I was on the IRS deadline and because it was a late return....Crooks! Price gouging! I'm sueing Block.
"So lets go back to how this whole argument started. I go to a tax preparer on April 15th who attempts to overcharge me by $200 plus but I have no idea what I may owe if any. I refuse to overpay and walk out. I print out an extension request fill it out and since I have no clue what I may owe or if I am getting a refund I pay nothing with the extension but it is filled out and mailed/postmarked by April 15th."
So why did you not have the preparer prepare your return, and then tell you what you owe to the IRS and what his bill would be? Then you could have sent in the balance due with the extension and owed no penalties or interest. An extension is not valid unless 90% of the tax due is paid either before or with the extension request.
If you overpaid and they owe you, they could care less if you ever file. (wishful)
IRS already has copies of W2's, 1099's. They take what they have, make the taxpayer single with 1 exemption. If money is owed they'll send a bill, showing what they have & demand a return with signature be done.
Most folks have dependents, or have sold stock which can reduce the tax, or get them into a refund, due to having a basis. The letter will also show if they have mortgage interest, but not property tax or other items that can be added to the Sch A. Some of these notices have gone back to 2001, demanding years of returns. If there is a refund they can't have it, as after 3 years it's closed to refund, but not balance due. I do dozens of these type returns every year, having to do 6 years worth for many.
Its heart breaking to see refunds in 2001-2006, that are lost, while client has balance due for the rest of the years..... Its money they threw away due to not filing.
If the W2's and 1099's IRS has gives a taxpayer a refund when single with 1 exemption is used, those taxpayers will never hear from IRS.
A rare letter from IRS I have seen a few times says: If your happy with your return, do nothing. (more or less) Those letters usually result in a refund situation, that something simple was missed that IRS knows about.
OR, another letter I've seen is to the effects: Check your return, if its not correct please amend. That usually means a kid was claimed by 2 people. Efile has stopped most from doing this, but I do see an occasional letter, due to Mom getting a reject that child was already claimed, and she now mails her return in with letter proving she's the custodial parent. The other party that claimed the kid has a chance to "confess".
A new IRS letter I saw this month was to a Sch C taxpayer (single, no dependents) being called in for an audit. Letter says: Income too small to support deductions.
Luckily this client wasn't a "ceiling gazer"..... he has all receipts & a spread sheet done by a bookkeeper. He lives with a girl friend, & they jointly own a home and co-mingle funds.
I think as pros, we need to be extra diligent about Sch C taxpayers. IRS has finally caught on!
You sound like some of my customers.
Your experience is typical.
I am not complaining about hrb work but their price for an extra K1 etc.
I've had minorities who paid $175-$200 for what we charge $100-$125
I spent 30 minutes to make that money and i'm satisfied.
"I then over the next 2 weeks find a preparer who will file the return and not overcharge me.... I would of in this example saved the entire $200."
Um, louisvilleliberty, did the new preparer you found work for free? You go to one tax pro who charges a couple hundred, walk out, find someone else, file late, and save $200 in tax prep fees? Sometimes you get what you pay for, you know.
"The pettiness of the group here is becoming quiteamazing, but curiously entertaining." jtxagony
Hey com'on. We're tax people. We're fascinated with the Internal Revenue Code, which is made up of a million finer points. The Regs and case law only add to the complexity, which whets our appetite. Why do you think we're called tax PROFESSIONALS? One of those minute details might just save you a bundle.
In the spirit of that minutia, here is The Answer we've all been looking for (no, I'm not trying to prove myself superior, but the issue peaked my interest and I went to the legal sources): Failure to file a return (or extension request) by the due date is a criminal offense. However, the courts have held that if no tax is due, no late filing penalty applies [Patronik-Holdere v. Commissioner, 100 T.C. 374(1993)]. The legislative branch has agreed (H.R. Conf. Rep. No. 97-760).
It all boils down to common sense: If you owe the gov't money, you darn well better file and pay on time or they'll sock you with civil if not criminal charges. If you overpaid and they owe you, they could care less if you ever file.
So lets go back to how this whole argument started. I go to a tax preparer on April 15th who attempts to overcharge me by $200 plus but I have no idea what I may owe if any. I refuse to overpay and walk out. I print out an extension request fill it out and since I have no clue what I may owe or if I am getting a refund I pay nothing with the extension but it is filled out and mailed/postmarked by April 15th.
I then over the next 2 weeks find a preparer who will file the return and not overcharge me who goes ahead and files the return marking that I had sent in an extension by April 15th. It turns out I owe $1000 which I write a check and mail in with the return and by the time the return is received and processed by the IRS it is exactly 30 days past the deadline. I am responsible for the interest and the .5% per month till paid for paying late. For paying late it will be a whopping $5 (1 month) and the interest will be very minor. Is it worth it to overpay by hundreds for tax preparation or refuse to be taken advantage of and find another professional and pay a few dollars in interest plus the .5 percent ($5) for paying late to save approx. $180 plus in this example? Now if I had not owed and I was due a refund there would of been no interest or no penalties and I would of in this example saved the entire $200.
Correct but that penalty is nothing compared to to the failure to file penalty. The point is if you read the other posts posted by others and you do not understand taxes you will would think if you cannot pay then you might as well not file since your going to be penalized anyway. I am not arguing the fact that you should pay on time. I am saying that if you there is no way to pay, because you flat out do not have the money, you will save yourself a ton of money by filing a return and paying what you can or even paying nothing then not filing a return at all and getting nailed with the failure to file penalty. The failure to file penalty is 5 percent the failure to file penalty is one half of one percent. Please read below.
Background Information on IRS Tax Penalty
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The law imposes penalties to ensure that all taxpayers pay their taxes. Some of these penalties are discussed below. If you underpay your tax due to fraud, you may be subject to a civil fraud penalty. In certain cases, you may be subject to criminal prosecution.
Failure-to-file penalty. If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. The penalty is 5% of the tax not paid by the due date for each month or part of a month that the return is late. This penalty cannot be more than 25% of your tax, but it is reduced by the failure-to-pay penalty (discussed next) for any month both penalties apply. However, if your return is more than 60 days late, the penalty will not be less than $100 or 100% of the tax balance, whichever is less. You will not have to pay the penalty if you can show reasonable cause for not filing on time.
Failure-to-pay penalty. You may have to pay a penalty of 1/2 of 1% of your unpaid taxes for each month or part of a month after the due date that the tax is not paid. This penalty cannot be more than 25% of your unpaid tax. You will not have to pay he penalty if you can show good reason for not paying the tax on time.
The pettiness of the group here is becoming quiteamazing, but curiously entertaining. Everybody is quick to point out the trivial detail the other guy left out of his comments, and everybody trying to prove to everybody else that they're the REAL expert. Each person trying to correct the other person with their "superior" understanding. Too funny. It makes everybody look small, actually.
Louisville, There is a Failure to Pay Penalty (see the following from Pub 17) if you do not pay at least 90% by the due date (April 15).
Paying tax late. You will have to pay a failure-to-pay penalty of 1/2 of 1% (.50%) of your unpaid taxes for each month, or part of a month,after the due date that the tax is not paid. This penalty does not apply during the automatic 6-month extension of time to file period if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return.
Gee Louisville, I get the same notices as you. Yeah, penalties are not assessed because you file the return by Oct 15th, if you asked for an extension. Most of the people I have seen do not file for the extension, so they are liable for penalties due to that.