In 2011, Paul, who is single, has a comfortable salary from his job as well as i

Question

In 2011, Paul, who is single, has a comfortable salary from his job as well as income from his investment portfolio. However, he is habitually late in filing his federal income tax return. He did not file his 2011 income tax return until December 1, 2012 (due date was April 17, 2012) and no extensions of time to file the return were filed. Below are amounts from his 2011 return: Paul sent a check with his return to the IRS for the balance due of 5,619. He is relieved that he has completed his filing requirement for 2011 and has met his financial obligation to the government for 2011. Has Paul met all of his financial obligations to the IRS for 2011? If not, what additional amounts will Paul be liable to pay to the IRS?

Explanation / Answer

IRS can levy failure to file penalty and failure to pay penalty if the return is not filed in time and the taxes are not paid.

Penalty for filing late is normally 5 % of unpaid taxes for each month or part of the month that a tax return is late

Penalty for not paying taxes by deadline is 0.5 - 1% of unpaid taxes for each month or part of the month after the due date

Since both the penalties apply in this case, the maximum penalty is 5%, also since the return is filed more than 60days after the due date, the minimum penalty is $135 or 100% of unpaid taxes

However, the penalty can be waived off if Paul can show reasonable cause for not filing or not paying in time.

Penalty that could be levied:

Taxes due 32817 Taxes paid 27198 Unpaid taxes 5619 Delay by 7.5 months Penalty 5% per month Penalty 2,247.6 (5,619*5%*8)

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