Scott files his tax retum 65 days after the due date. Along with the retum, Scot

Question

Scott files his tax retum 65 days after the due date. Along with the retum, Scott remits a chedk for $50,000 which is the balance of the tax owed. Disregarding the interest element, Scott's total failure to file and to pay penalties are: a. $8,250. b. $7,500. C. $6,000. d. $750 e. None of the above ANS: B Following the procedure set forth in Example 15, the penalty is determined as follows: 750 Failure to pay penalty [0.5% $50,000. 3 (two months violation)] Plus Failure to file penalty [5% $50,0003 $7,500 (three months violation)] Less: Failure to pay penalty 0 6,750 $7,500 Total penalties

Explanation / Answer

Answer:

The failure-to-pay penalty is usually 0.5% per month of the unpaid taxes. If the 5% failure-to-file penalty as well as the 0.5% failure-to-pay penalty both occurs in any month, the maximum penalty amount charged for that month is 5%

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