NC extensions denied in error

The NC Department of Revenue has started sending out notices denying extensions that were timely filed. The notices demand the income tax return be filed within 30 days and threaten penalties and interest if tax is due. If you are due a refund, then there will be no penalty or interest due. Of course, there should be no late filing penalty for the extensions denied even if the taxpayer owes as long as the taxpayer or preparer has proof of timely mailing. There can still be interest and late payment penalties but that is because the extra tax was not paid with the extension.

Reason NC extensions denied

The NC Association of CPAs is reporting that several trays of certified mail were delayed in the Raleigh Post Office. Once the mail finally made it to the Department of Revenue they were so late that NC assumed they were mailed after the deadline. NC should have looked at the postmarks and determined which were filed timely. NC is working to correct their records.

What should taxpayers do?

If you filed on or before April 18, 2016, then this will not affect you.

If you filed an extension and do not receive a notice, then just wait. There is nothing to do except file your return timely.

If you filed an extension and receive a notice denying it, you need to reply. NC should fix this but you need to protect yourself by sending a response via certified or registered mail along with proof you filed your NC extension timely. Your proof of timely filing will be one of three things:

1. If you filed the extension on NC’s website, then you should have proof showing timely filing.
2. Certified Mail receipt addressed to the proper address for NC extensions and marked by the Post Office as received by the Post Office on or before April 18, 2016. If I filed your NC extension, this is the proof I have. Please send me the notice so I can get NC to update their records.
3. Registered Mail receipt addressed to the proper address for NC extensions and marked by the Post Office as received by the Post Office on or before April 18, 2016.

If you put a stamp on the extension, you are at the NC Department of Revenue’s mercy. They do not have to prove you did not file timely, you have to prove you did file the extension timely. Unfortunately, your word is not usually enough.

What we learned

Taxpayers need to send important tax documents Certified or Registered Mail or by means of an approved electronic method.