Question

Elijah did not request a tax-filing extension, and he waited until June 21, 2017, to file his Form 1040 for Tax Year 2016. His balance due is $88. Elijah is subject to failure-to-file and failure-to-pay penalties totaling_________

a. $0

b. $9

c. $12

d. $13

Answer 1

1) The due date for filing form 1040 is April 18,2017. If you are unable to file or pay, you can request for tax filing extension.

2) In the given case, the tax filing extension was not taken and the the form was filed on June 21, 2017.

3) The penalty for filing late is 5% of the unpaid taxes for each month or part of the month that a tax return is late. That penalty starts accruing from the day after the tax filing due date and will not exceed 25% of your unpaid taxes.

4) If you do not pay your taxes by the tax deadline, you normally will face a failure to pay penalty of 1/2 of 1% of your unpaid taxes. That penalty applies for each month or part of the month after the due date.

5) If both the 5% failure to file penalty and 1/2% failure to pay penalties apply in a month, the maximum penalty that you will pay for both is 5%.

6) Since, in the given case, both the penalties are applying for the 3 months period (April 19, 2017 to June 21,2017), the maximum penalty that has to be paid will be 5% of the balance due i.e $88 = 5% of $88 i.e 13.2 rounded off to 13$.

7) The amount of penalty to be paid is $13.