1, If an amount is zero, enter \"0\". If required, round your answers to two dec

Question

1, If an amount is zero, enter "0". If required, round your answers to two decimal places.

a. Wilson filed his individual tax return on the original due date, but failed to pay $17,220 in taxes that were due with the return.

If Wilson pays the taxes exactly 2 months late, calculate the amount of his failure-to-pay penalty.
$

b. Joan filed her individual income tax return 4 months after it was due. She did not request an extension of time for filing. Along with her return, Joan remitted a check for $16,460, which was the balance of the taxes she owed with her return.

Disregarding interest, calculate the total penalties that Joan will be required to pay, assuming the failure to file was not fraudulent.
$

c. Jack filed his tax return 7 months and 1 days late and did not request an extension of time for filing. Jack's return indicated that he is to receive a $5,495 refund in taxes.

Calculate the amount of Jack's penalty for failure to file his tax return on time, assuming the failure-to-file was not fraudulent.
$

2, Linda underpaid her taxes for the current year by $24,000 due to negligence.

a. Calculate Linda's accuracy-related penalty for negligence.
$

b. Assume that the underpayment of taxes by Linda was determined to be fraudulent, and calculate the total amount of Linda's fraud penalty.
$

Explanation / Answer

a) If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.

Penalty = 17220 * 1/2% * 2 months = $ 172

b) The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.

If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.

Penalty = 16460 * 5% * 4 Months = 3292

c) Penalties kick in only if you owe the IRS. In case of Refund returns penalities shall not be charged.

2. a) Sec. 6662 imposes an accuracy-related penalty equal to 20% of any underpayment of federal tax resulting from certain specified taxpayer behaviors (e.g., negligence, disregard of rules or regulations, substantial understatement of income tax, and certain valuation misstatements).

Penalty = 24000 * 20% = 4800$

b)

IRC 6663 imposes a fraud penalty at the rate of 75% on the portion of any underpayment attributable to fraud for returns due after 12/31/89 (without regard to extensions). This penalty only applies to filed returns.

Note:

The accuracy-related penalty, IRC 6662, cannot apply to any portion of an underpayment on which the fraud penalty is imposed.

Penalty = 24000*75% = 18000$

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