Question

Isabella files her income tax return 90 days after the due date of the return without obtaining an extension from the IRS. Along with the return, she remits a check for $2,000, which is the balance of the tax she owes.Note: Assume 30 days in a month. Disregarding the interest element, enter Isabella's failure to file penalty and and failure to pay penalty.

Answer 1

Answer:

 Penalty for Failure to Pay  = $30

Penalty for Failure to File = $270

Explanation:

given data

income tax return =  90 days

return with remits a check = $2,000

a month = 30 days

solution

we know as per IRS guidelines

penalty for failure to pay is usually half of 1% of the unpaid taxes for each month and penalty for filing late is usually 5% of the unpaid taxes for each month

so penalty for Failure to pay is

Penalty for Failure to Pay = Tax amount  × Penalty rate × No of month late    .......................1

 Penalty for Failure to Pay =  $2,000 × (1/2 of 1%) × 3 months

 Penalty for Failure to Pay = $2,000 × 0.005 × 3 = $30

and

penalty for Failure to file is as

Penalty for Failure to File = ( Tax amount × Penalty rate × No of month late) - Penalty for failure to pay    ....................2

Penalty for Failure to File = ( $2,000 × 5% of 3 months ) - $30

Penalty for Failure to File = ( $2,000 × 0.05 × 3 )  - $30

Penalty for Failure to File = $270