R4 M3 Federal Tax Procedures and Taxpayer

Question 1

Penalties for underpayment of estimated taxes –> Corporations are required to pay estimated taxes in four installments.

Each installment must be 25% of the required annual payment
—> The required annual payment is the lesser ($ 110,000 or $35,000 this is an example)

(1) 100% of the current year tax
or
(2) 100% of the prior year tax ( as long as the prior year tax is not zero)

Question 2

As long as the extension was filed in a timely manner (on or before April 15 deadline) and the return was filed during the extension period ** you can get an extension file but you cannot get an extension to pay what you owe.

Failure to penalty –> 0.5% per month up to a maximum of 25% of the unpaid tax.

2.5 months into the third month is consider 3 months

30,000 ( unpaid tax) x 3 months x .5% = $450.00

The interest is 1% per month

30,000 x 3 months x 1% = $900.00