Taxes: Compliance Responsibilities

Question 1

Taxes:
Compliance Responsibilities
Filing Requirements

Answer 1

Filing Requirements

• individual must file if GI - Standard Deduction - Personal Exemption = positiver
• includes exemption for over 65
• or if net self employment income > $400

Question 2

Taxes:
Compliance Responsibilities
Filing Deadlines

Answer 2

Filing Deadlines

• Individual: 15th of 4th month after close of tax year (Can have 6 month extension)
• Corp: 15th day of 3rd month after YE (6 month extension)
• S Corp: 15th of 3rd month after close of tax year (Can have 6 month extension)
• Partnership: 15th of 4th month after close of tax year (Can have 5 month extension)
• Fiduciaries (Estate & Trust): 15th of 4th month after close of tax year (Can have 5 month extension)
• Tax-Exempt: 15th of 5th month after YE (3+ month extension)
• Estate Tax: due 9 months after death (6 month extension)
• in all cases est tax is due on date return due

Question 3

Taxes:
Compliance Responsibilities
Penalties

Answer 3

Penalties

1. Nonfiling Penalty
2. Underpayment Penalty
3. Nonpayment Penalty
4. Accuracy Penalty

Question 4

Taxes:
Compliance Responsibilities
Nonfiling Penalty

Answer 4

Nonfiling Penalty

• not filed by due date
• 5% per month of tax due
• max = 25% tax due
• min = lesser of: $135 or amount of tax due
• if fraudulent, penalty is 15% per month, max 75%

Question 5

Taxes:
Compliance Responsibilities
Underpayment Penalty
Required Payments for Individuals

Answer 5

Underpayment Penalty
Required Payments for Individuals
- failure to remit taxes during year
- no penalty if tax due less than $1k
- no penalty if:
  - 90% current year tax is paid
  - 100% of last year's taxes
  - if AGI > $150k = 110% of last year's taxes
- annualization exception

Question 6

Taxes:
Compliance Responsibilities
Underpayment Penalty
Required Corporate Payments

Answer 6

Underpayment Penalty
Required Corporate Payments
- est payments are due 4/15, 6/15, 9/15, 12/15
- no est tax payments if payments equal lesser of:
- 100% current year tax
- 100% of previous year tax
- or annualization exception met
- if more than $1M TI in any 3 previous years, exception only for Q1 installment
- previous year NOL cannot offset

Question 7

Taxes: 
Compliance Responsibilities
Underpayment Penalty
Required Corporate Payments
Annualization Method

Answer 7

Underpayment Penalty
Required Corporate Payments
Annualization Method
- for individuals and corporations
- amount due with installment:
- tax due for month before installment less
- amount required to be paid for previous installments
- different exceptions may be used for different installments
- if less than under regular, subject to recapture

Question 8

Taxes:
Compliance Responsibilities
Nonpayment Penalty

Answer 8

Nonpayment Penalty

• tax shown on return not paid by filing date
• interest on late payments starts on due date and calc’ed using federal ST interest rate
• penalty of 0.5% per month up to 25%
• if both non-payment and non-filing, mac penalty is 5% per month
• neither if reasonable cause: death, serious illness, ect

Question 9

Taxes:
Compliance Responsibilities
Accuracy Penalty

Answer 9

Accuracy Penalty

• underpay because of inaccurate position
• 20% of tax due to inaccuracy
• waived if reasonable basis for position
• penalty for gross overstatement of value or basis, 20% for substantial misvaluation and 40% gross
• penalty for fraud is 75% understatement in addition to 50% interest

Question 10

Taxes:
Compliance Responsibilities
Statute of Limitations

Answer 10

Statute of Limitations
- Primary: 3 years after due date/filing date, whichever later
Exceptions
1. 6 years if more than 25% GI understated
- never expires if fraud or fails to file
2. Form 1040X (erroneous taxes by indiv) is later of:
- 2 years from payment
- 3 years date return filed (or April 15 if filed early)

Question 11

Taxes:
Compliance Responsibilities
Preparer Penalties

Answer 11

Preparer Penalties
- apply to all tax return preparers
- unreasonable position pay greater of:
- $1k or
- 50% income of preparer from return
Exception
- if position was disclosed and had reasonable basis
- applies to reportable transactions and tax shelter only if more reasonable than not
- reasonable cause and good faith exceptions apply
- willful attempt: greater of $5k or 50% income earned

Question 12

Taxes:
Compliance Responsibilities
Preparer Penalties
Additional Penalties

Answer 12

Preparer Penalties
Additional Penalties
- not signing a return done for compensation
- not providing a copy of return for taxpayer
- not keeping list of returns filed
- endorsing or negotiating refund check
- disclosing info from return
- $500 if not due diligence on earned income credit
- may not base fees on % of refund
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