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6 December, 13:57

Isabella files her income tax return 90 days after the due date of the return without obtaining an extension from the IRS. Along with the return, she remits a check for $2,000, which is the balance of the tax she owes. Note: Assume 30 days in a month. Disregarding the interest element, enter Isabella's failure to file penalty and and failure to pay penalty.

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  1. 6 December, 15:44
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    Penalty for Failure to Pay = $30

    Penalty for Failure to File = $270

    Explanation:

    given data

    income tax return = 90 days

    return with remits a check = $2,000

    a month = 30 days

    solution

    we know as per IRS guidelines

    penalty for failure to pay is usually half of 1% of the unpaid taxes for each month and penalty for filing late is usually 5% of the unpaid taxes for each month

    so penalty for Failure to pay is

    Penalty for Failure to Pay = Tax amount * Penalty rate * No of month late ... 1

    Penalty for Failure to Pay = $2,000 * (1/2 of 1%) * 3 months

    Penalty for Failure to Pay = $2,000 * 0.005 * 3 = $30

    and

    penalty for Failure to file is as

    Penalty for Failure to File = (Tax amount * Penalty rate * No of month late) - Penalty for failure to pay ... 2

    Penalty for Failure to File = ($2,000 * 5% of 3 months) - $30

    Penalty for Failure to File = ($2,000 * 0.05 * 3) - $30

    Penalty for Failure to File = $270
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