The move to extend the tax-filing deadline for Rhode Island businesses and residents by four weeks to May 11 will extend crunch time for a number of Rhode Island’s accounting firms.
Many, however, are still encouraging clients to stick to the traditional April 15 deadline whenever possible, citing concerns that include potential IRS software glitches.
“So many of our clients are filing in numerous states – including states that don’t recognize the extension,” said Alan Litwin, the managing director of Kahn, Litwin, Renza & Co. Ltd., in Providence. His firm is going to keep its focus on April 15 as the deadline, where appropriate.
Litwin is among those wary of the Internal Revenue Service’s computer software, because in the past, whenever the deadline has been extended, the federal government has not updated its computers, producing correspondence and penalty notices based upon the April 15 deadline.
“If the IRS computers are not reprogrammed, late notices generated by the IRS keep coming,” he said. While his firm has been able to resolve such notices in the past, Litwin said, it took a significant amount of time and expense for clients and the firm.
For those clients who cannot pull their records together because of the flooding, one silver lining, Litwin said, is that they will have an additional four weeks to put funds together to pay any potential taxes owed.
Rhode Island taxpayers now have an additional four weeks to file their federal and state returns and pay any taxes owed because President Barack Obama designated all Rhode Island counties federal disaster areas qualifying for individual assistance in response to the recent severe flooding.
John Finnerty, the tax principal at Lefkowitz, Garfinkel, Champi & DeRienzo P.C. in Providence, last week said that about 50-60 percent of his firm’s clients – about 750-1,000 taxpayers – have not yet filed their 2009 returns. “Rather than [falling off] a cliff on April 15, we’ll keep going until May 11,” he said.
A decision to include casualty-loss claims from the recent flooding as part of the 2009 tax returns, which will enable a business or individual to recover costs more quickly, in 2010 instead of 2011, is one important area that Finnerty predicts will create an increase in the volume of work for accountants.
He added that he was not anticipating any personal hardships due to the extension. Finnerty said that Lefkowitz, Garfinkel, Champi & DeRienzo had not changed any vacation or time off. Further, he expected to be able to manage without having to hire any additional temporary staff.
David DiSanto, managing partner at DiSanto, Priest & Co., in Warwick, said that his office is “right near ground zero, in the Warwick Mall area. Our office was not affected, but a lot of the businesses we serve have been,” he said. “We’re going to take advantage of the May 11 extension for a number of clients.”
DiSanto said that in general, accountants don’t like the extension. “It’s a tough time of year for us. Extending the misery period is tough,” he said. However, for some clients, it will be important to try and keep to the April 15 deadline. “To the extent that there are refunds, clients who file locally try to file as soon as possible,” he said. Other clients, he continued, who need to file in multiple states, will also seek to file on time with the April 15 deadline.
According to DiSanto, the IRS will monitor returns by zip code from federal disaster areas. He expects 20-30 percent of clients to have flood-related issues.
Patricia Thompson, tax partner with Piccerelli, Gilstein & Co. LLP in Providence, voiced concerns similar to Alan Litwin’s about potential glitches that could happen because of changes not made in IRS software to reflect the new May 11 deadline. “The IRS says that they are going to change the software, but I’m not sure that the IRS is going to do it in all cases. And if they don’t, people will get late notices,” she said.
Thompson said it was hard to estimate the total number of clients who might take advantage of the extended deadline. “It could be 25 percent, maybe 50 percent,” she said.
Tax preparers aren’t the only ones doubting the IRS’ ability to make good on the tax-filing extension.
Two Johnston Democratic state lawmakers, Rep. Stephen R. Ucci, and Sen. Christopher B. Maselli, last week said they would file legislation to ensure that those affected by the flooding are given the proposed extra time.
The lawmakers said they wanted a law on the books to guarantee that the deadline extension will be upheld.
Jacquelyn H. Tracy, founding co-partner of a small Providence accounting firm, Mandel & Tracy, with 10 employees, said she is into what she called her “fifth busy season.” Tracy said her firm’s goal is to “work through the April 15 deadline.” About 15-20 percent of her clients are not out the door yet with the tax filings, she estimated.
Her advice to taxpayers: “Don’t wait until the last minute just to wait until the last minute.” For taxpayers with potential flood losses, she recommended that casualty-loss claims will be important. “Make sure you document what the actual losses are, and what the reimbursements might be.”
Tracy currently serves as president of the Rhode Island Society of Certified Public Accountants. She said that despite the change in tax deadlines, her business partner, Kathryn B. Mandel, is still planning a scheduled vacation beginning April 22, a week after the normal tax deadline. “We’re staying with our original plans,” she said.
The two do tend to work later in the evenings during tax season, Tracy said, but she sees this as part of their normal effort to turn things around quickly. “You never know what’s around the next quarter, because you can’t predict something like a flood,” she said. •
