Question

Amanda files her current year tax return on June 18 of the following year. On August 8 she pays the amount​ due, if​ any, without requesting an extension. The tax shown on her return is $20,000.Amanda pays no estimated taxes and claims no tax credits on her current year return.

Requirements

What penalties will the IRS likely impose on Amanda (ignoring the penalty for underpayment of estimated​ taxes)? On what dollar​ amount, and for how many​ days, will Amanda owe​ interest? Assume Amanda committed no fraud and that any penalty and interest period begins on April 16.
a.	Assume her wage withholding tax amounts to $17,000
b.	Assume her wage withholding tax amounts to $34,000
c.	How would your answer to Part a change if Amy requests an automatic​ extension?

Answer 1

-The due date of filing tax return and the payment of the tax is April 15, The tax return can be filed before the extended date ( if requested and approved ) but the payment date remains same i.e. April 15

- Here Amanda filed the tax return on June 18 and paid the due amount of tax on August 8( if any ).

a. Her tax shown in return is $ 20000 and her withholding tax is $ 17000.

Hence Amanda is required to pay $ 3000 while filing her return on April 15, which she paid on August 8 .

also her return was filed on June 18. So the penalty imposed on Amanda will be -

i) failure to file = 5 % of the tax i.e. 5% of $ 3000 = $ 150 per month i.e. $ 450 ( for 3 months)

reduced by ' failure to file ' i.e. 0.5 % of tax $ 3000 = $ 15 per month i.e. $ 45

  So, penalty on failure to file = $ 405

ii) failure to pay = 0.5% of the tax i.e 0.5% of 3000 = $ 15 per month i.e. $ 60 (for 4 months)

iii) interest = it is calculated on tax amount $ 3000 + failure to file $ 405 = $ 3405

date	explaination	amount	interest
06/30/2018	$3,405.00 was compounded at 5% for 76 days.	$35.63	$ 35.63
08/08/2018	$3,440.63 was compounded at 5% for 39 days.	$18.43	$ 54.06

So, total amount due will be 3000+405+60+54.06 = $ 3519.06

b. Her tax shown in return is $ 20000 and her withholding tax is $ 34000. So she does'nt owes any tax amount .

So, there is no unpaid tax required to be reported i.e. $ 0,

Hence penalty will be $ 0.

c. If Amanda requests for extension and it is approved she can file return before such extended date ( after due date)

then the penalty for failure to file doesnt apply but the penalty for failure to pay still applicable

So, failure to pay = 0.5 % of total tax liability = 0.5% of $ 3000 = $ 15 per month i.e $ 60 ( for 4 months )

NOTE - penalties charged each month or a part of the month return is late, upto 5 months applies for full month even if the return is filed less than 30 days late.