Country / Language

North Carolina Erroneously Denies 2015 Extension


6/16/16

Synopsis
 
Taxpayers, including individuals, partnerships and trusts, who timely applied for an extension to file their 2015 North Carolina tax return are likely to receive a letter from the North Carolina Department of Revenue (the Department) erroneously denying the extension request on the basis that the request was not timely, i.e., the request missed the April 18, 2016 deadline.
 
Issue
 
A spokesman for the Department has acknowledged that hundreds of letters were sent out to taxpayers erroneously denying timely extension requests and that steps are being taken to resolve the issue.  Among the steps being taken are that taxpayers that received an erroneous denial letter, but timely filed their extension, should soon receive another letter from the Department stating that the first letter was incorrect. No further action will be required from such taxpayer; the Department will make all necessary adjustments in their system.
 
The full text of the denial letter is reproduced below:

Dear Taxpayer:
 
We have received your application for an extension of time to file a State tax return.
 
The extension of time you requested for filing your return has been denied.  The application was not timely filed. Please send us the return along with payment of the applicable tax, penalties and interest due within 30 days as explained below. Be sure to include a copy of this letter with your return.
 
For failure to file a tax return, the law prescribes a civil penalty for late-filing of 5 percent of the tax for each month the return is late, limited to a maximum penalty of 25 percent of the tax, and a 10 percent penalty for failure to pay the tax by the due date. For failure to file an informational partnership or fiduciary return, the law prescribes a civil penalty for late filing of $5.00 per month for each month the turn is late, limited to a maximum penalty of $25.00. The law also provides certain criminal penalties for willful failure to file a return and willful failure to pay the tax.
 
Interest is due at the rate as prescribed by G.S. 105-241.1(i) on the amount of tax owed from the date the return is due to the date it is filed and the taxes paid. If you need assistance or have questions regarding this notice, you may call the Department toll-free at 1-877-252-3252.

What Does CohnReznick Think?
Taxpayers who timely filed an extension request and received an erroneous denial but do not receive a second letter correcting the denial should send the Department evidence of a timely filed extension which may include certified receipts.  Taxpayers that lack evidence of timely filed extensions, such as certified receipts, may still want to provide evidence of the filing if they can establish the Department received the extension within the deadline. Taxpayers who did not timely apply for an extension will need to follow the instructions contained in the original denial letter reproduced above.
 
Contact

For more information, please contact Henry Chiwaya, Director, at henry.chiwaya@cohnreznick.com or 301-280-1812 or Harry Tuul, Senior Manager, at harry.tuul@cohnreznick.com or 703)-744-6720.

Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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