Extended Returns Stall on the Documents Clients Haven't Sent

In the first two weeks of October, a small tax practice looks less like a place where returns get prepared and more like a collections desk. The hard technical work on most extended returns is done or nearly done. What's missing is a brokerage statement, the second of three K-1s, a list of rental expenses, or an answer to a question that was emailed in August. Staff spend the days before October 15 calling, emailing and texting the same clients they reminded in June, and the owner spends evenings reviewing returns that arrive complete only at the last minute. Every file that sits open costs billable time spent on follow-up instead of preparation, and a return finished in the final 48 hours gets a thinner review than it should.

The problem is not mainly about complexity. In a September poll by the National Association of Tax Professionals, reported by CPA Practice Advisor, 30% of practitioners said missing income documents were what kept extended returns unfinished, and another 29% pointed to incomplete business, rental or side-income records. Asked what they most wished clients would do, 56% said send the remaining documents and 20% said answer outstanding questions. About four in ten said their extension clients tend to finish in late September or later, which leaves the work stacked against a fixed date.

The calendar pushes the bottleneck downstream

Part of the reason is structural. A client's individual return depends on documents produced by other people on their own schedules: employers, brokerages, banks, and, most stubbornly, partnerships and S corporations that issue Schedule K-1s. Those entities can extend their own returns to September 15, so a client with several pass-through interests may not have final figures until a few weeks before their own extended deadline. Brokerages issue corrected 1099s well after the original ones. Each late document can also reveal that something else is needed, so a return that looked nearly ready in September reopens in October.

The volume of these upstream returns has grown. Partnership filings with the IRS were more than a fifth higher in fiscal 2025 than in fiscal 2018, and every one of those returns generates a K-1 for each partner. For a small firm whose clients include business owners, real estate investors and people with private fund interests, that growth shows up directly as more documents to track and more chances for one of them to arrive late.

The client's own incentives point the wrong way as well. Many clients treat an extension as the end of the conversation rather than a deadline. The same NATP poll found that 90% of practitioners consider client misunderstandings about extensions common, and the most frequent one is the belief that an extension also delays payment. A client who thinks the pressure is off in April has little reason to hunt for a missing statement in July.

Staffing makes the follow-up harder to absorb. Chasing documents is repetitive, but it requires someone who knows the client's file well enough to recognize what's missing, and those people are scarce. The Journal of Accountancy reported that U.S. schools awarded 55,152 accounting bachelor's and master's degrees in the 2023–2024 academic year, down 6.6% after a 9.6% drop the year before. In a small practice, that usually means the follow-up lands on the owner or a senior preparer, the people whose time is most expensive.

Portals, checklists and late fees each fix one piece

Firms have not ignored this. The standard advice, and what most practitioners say they already do, is a combination of client portals, organizers or document checklists, automated reminder emails and firm deadlines for submissions, sometimes backed by a late-documents fee. Each of these helps, and each breaks down in a predictable place.

Portals assume clients will log in. Clients forget their credentials, upload a photo of the wrong page, or simply reply to an email with an attachment, which a staff member then has to move into the file by hand. Clients who work with several professionals often resist learning yet another login, and they drift back to email. Checklists built from last year's return miss what changed: a new brokerage account, a sold rental, a spouse's new job. Automated reminders are generic by design, so they tell the client that "documents are outstanding" rather than that the Schwab 1099 and the second K-1 from a particular fund are still missing. Generic reminders are easy to ignore, and a client who gets the same one every week learns to ignore it. Late fees change behavior for some clients, but many owners are reluctant to charge long-standing clients and end up waiving them.

Practice management software tracks the status of each return well. What it generally does not do is look inside the documents that have arrived and work out what's still missing. That comparison between last year's return, this year's uploads and the client's emails remains manual work, done by a person reading through the file.

Reading the file is no longer the hard part

What has changed is the ability of software to do that comparison. Current AI models can read the documents tax clients actually send, including scanned K-1s, multipage brokerage statements, phone photos and spreadsheets of rental expenses, and extract the payer, the form type and the key figures with reasonable accuracy. That means a system can check a client's file against the prior-year return and the documents received so far, and produce a specific list of what is still outstanding instead of a generic status.

The same models can draft follow-up messages that name the exact document, the issuer and the reason it matters, and they can read a client's reply to tell whether it answers the question or raises a new one. Preparers can already pull wage and income transcripts from the IRS showing the information returns the agency has received, which gives an independent record to check client uploads against. None of this changes when a partnership finishes its books, but it moves the work of knowing what's missing from the preparer's memory to a list that updates on its own.

Where custom automation fits

For a small practice, the useful version of this is narrow. A custom-built system can sit between the firm's inbox, its portal and its practice management software, reconcile each extended client's documents against last year's return, send specific follow-ups on a schedule the firm sets, and flag files where a client's answer needs a preparer's judgment. It leaves the preparation and review where they are. The aim is to have the owner's October spent on returns rather than on remembering which client still owes which form.