Extend a hand to clients filing extensions

(for H&R Block Corporate Communications)

April 9, 2007 – When a client comes in to file an extension Form 4868, you have an opportunity to make an impression that will build a long-term client relationship. “This is a high stress time for the client and we can be the hero that saves the day,” says Diane Cooley, Assistant Vice President – Tax Professional Experience.

The first step is to be sensitive to the situation of the client. “There are as many reasons for needing an extension as there are people,” says Jackie Perlman, Senior Tax Research Coordinator.

Clients may be concerned about missing documents, upset about life changes that make it difficult to cope with taxes, or just nervous about procrastinating and that’s when they turn to a tax professional for the answers they need to relieve their anxiety.

Misconceptions become opportunities

“The relationship begins with education,” says Crystal Tilsworth, a District Manager for northern metro Kansas City.

Clients with misconceptions about extensions will be grateful for knowledgeable advice.

The most important concept about extensions is also the one that’s most difficult for clients to understand. “The extension to file is NOT an extension to pay,” states Perlman. Clients often think additional time to file means additional time to pay, but those who file for extensions have to pay 90% of their tax liability by April 17 to avoid penalties. (IRS may charge interest on any unpaid balance.)

Other common client misconceptions become opportunities for education:

“If I pay my balance, why bother with filing an extension or a return?” Make sure the client understands that the non-filing penalty is actually costlier than the non-payment penalty. (5% per month on the unpaid balance for non-filing versus 0.5% per month for non-payment.)
“I filed an extension; I don’t have to file a return.” Explain to the client that they still has to file a final return or another extension by October 15 to avoid penalties.
“I have a refund coming; I don’t have to file an extension.” Help the client understand the benefits of filing. Some elections will expire if the return or extension are not filed by April 17, including recharacterizing IRA contributions. Also, the client may owe a balance due to a state that requires the filing of the federal extension form.

Building the relationship

There are many ways that the tax professional can build the relationship by making the extension process easier for the clients. Offer the support the client wants. Tom Tinsley, Instructional Designer, says, “Help the client make an informed decision. Say to the client, ‘If you want to do it, we’ll give you the Form 4868 and advice. If you want us to file the form, we’ll give you a coupon to apply toward the preparation of your final return. And if you have questions or concerns, here’s my business card, give me a call.’”

Make paying less painful. “We have several payment options for Balance Due,” says Tilsworth, “including paying by credit card, the Easypay loan, or installment payments with the IRS.”

Make it easy for the client to come back. Whether the client decides to file the extension form or have you file it, set a return appointment for the client to come back to complete the return and give the location of the year-round office.

“It’s as simple as offering a business card, a handshake, and a smile,” says Cooley. “As brief as it seems, if we handle this encounter well, many people will come back.”

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