5. U.S. Government Bond Interest: $1,000 What is her gross income for income tax

Question

5. U.S. Government Bond Interest: $1,000 What is her gross income for income tax purposes if her adjusted tax basis in the stock was $2,000? a. $45,000 b. $47,000. C. $49,000 d. $51,000 15. Sammy failed to file his tax return from a few years ago and pay the $5,000 tax liability that was owed at the time. Sammy's new tax advisor prepares and files the return in the current year, 21 and half months late. How much is his: 1. Failure to pay penalty, 2. Failure to file penalty, and 3. Total penalty? a. $550; (2) $1,125; (3) $1,675. b. $425; (2) $1,250; (3) $1,675 C. $550; (2) $700; (3) $1,250 d. $1,250; (2) $550; (3) $1,800

Explanation / Answer

Failure to pay penalty is 0.5% of the unpaid taxes for each month or part of the month after the due date.

Failure to file penalty is 5% of the unpaid taxes for each month or part of the month after the due date but will not exceed 25% of the unpaid taxes.

For any month/months if both the failure to pay and failure to file apply, the penalty will be 5% of the unpaid taxes for each month or part of it after due date or 25% of unpaid taxes whichever is less.

In the above case, Failure to pay penalty = 0.5% x $5000 x 22 months = $550

Failure to file penalty = 5% x $5000 x 22 months = $5500 or 25% x $5000 = $1250 whichever is less, thus failure to file penalty is $1,250.

In the above case, both the failure to pay and failure to file apply, thus the total penalty can not be more then 5% of the unpaid taxes for each month or part of it after due date or 25% of unpaid taxes whichever is less.

Total penalty = $1,250 ($5000 x 5%)

Option C is correct

1. Failure to pay penalty $550

2. Failure to file penalty $700 (remaining amount)

3. Total penalty $1,250

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.