4 Tax Penalties

Question 2

Tax penalty for Negligence

4.156

Answer 2

I.e., accidentally underpaying:
20% of the underpayment

Question 3

Tax penalty for Fraud

4.156

Answer 3

I.e., intentionally underpaying: 75% of the underpayment

Question 4

Tax penalty for Frivolous Return

4.156

Answer 4

$5,000

Question 5

Tax penalty for Failure to File

4.156

Answer 5

• 5% of the unpaid amount for each month or partial month that return is late up to 5 months (25%) max
• $510 min if late > 60 days
• reduced by Failure To Pay penalty if both are simultaneous, in which case max is 22.5%

Question 6

Tax penalty for Failure to Pay

4.156

Answer 6

• 0.5% of the unpaid amount for each month or partial month that tax remains unpaid since the due date of the return
• up to 25% max (50 months)

Question 7

Max penalty for Failure to Pay AND File Taxes

4.156

Answer 7

• FTF 4.5% per (partial) month, maxes at 22.5% after 5 mos
• FTP 0.5% per (partial) month, maxes at 25% after 50 mos
• = 47.5% total

Question 8

Penalties for Tax Preparers

4.156

Answer 8

For each failure to…
- Furnish a copy of return to taxpayer… $60
- Sign a return or refund claim… $60
- Furnish identifying number… $60 (preparer tax identifying #, PTIN)
- Retain a copy or list… $60 (of tax return or claims they prepared)
- File correct info on returns… $60
- Failure to be diligent in determining eligibility for certain tax benefits… $600 per failure

E.g., eligibility for…
1. HOH status
2. dependent credits such as (Add’l) Child Tax Credit
3. AOC and LLC
4. Earned Income Credit