03.03 Taxpayer Penalties Flashcards
True or False: Civil penalties are much more common than criminal penalties.
True.
What are examples of delinquency-related penalties?
Failure to file a tax return (late filing penalty)
Failure to pay tax owed (late payment penalty)
Failure to make estimated tax payments
How much is the failure to file penalty?
The failure to file penalty is based on how late a tax return is filed and the amount of unpaid tax as of the original due date. The penalty is 5% per month that the return is late, up to a total of 25% of the unpaid tax. If the tax return is not filed within 60 days of the due date, the minimum penalty is the lesser of $510 or 100% of the unpaid tax.
If the failure is fraudulent (intentional), the penalty is increased to 15% per month, up to a maximum of 75% of the tax due.
How much is the failure to pay tax owed penalty?
The failure to pay tax owed penalty is 1/2 of 1% (0.5%) for each month after the due date that the tax is not paid, up to a total of 25% of the unpaid tax.
What are the due dates for estimated tax payments?
Due by the 15th day of the 4th, 6th, 9th months of the taxable year and by the 15th of January.
True or False: And individual is only subject to an underpayment penalty if the balance due on the tax return is greater than $1,000.
True.
If the balance of taxes due is less than $1,000 then no estimated tax payments are required.
If taxes due are greater than $1,000, what is the tax liability?
If PY AGI is less than $150k > lesser of 100% of PY tax liability or 90% of CY tax liability
If PY AGI is greater than $150k > lesser of 110% of PY tax liability or 90% of CY tax liability.
What is an accuracy-related penalty?
Accuracy-related penalties are assessed if a taxpayer’s return includes an underpayment of tax due to negligent mistakes. It is 20% of the tax underpayment. The penalty is waived if there was substantial authority for the position taken or the taxpayer had a reasonable basis for the position taken and the position was disclosed on the return.
What is the tax fraud penalty?
Taxpayers who attempt to evade taxes may be subject to a tax fraud penalty equal to 75% of the tax underpayment.
What is tax evasion?
Failure to file a return; falsifying income; falsifying amounts that reduce taxable income.
What is tax fraud?
Willfully making and subscribing to any document made under penalty of perjury that the taxpayer does not believe to be true as to every material matter; willfully aiding the preparation of any tax-related matter that is fraudulent as to any material matter; removing or concealing property with intent to defeat taxes.
