Ms. Dela filed her unextended 2019 Form 1040 on November 2, 2020, and had no reasonable cause for the delinquency. The return showed a $22,840 balance of tax due. Compute Ms. Dela's late-filing and late-payment penalty.

Question

Quizplus · Accepted Answer

The late-filing penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25%. The late-payment penalty is 0.5% of the unpaid taxes for each month or part of a month that the tax payment is late, up to a maximum of 25%. Ms. Dela filed her return 5 months late (May 1, 2020, was the deadline for filing 2019 taxes, making it 5 months late by November 2, 2020). The late-filing penalty is thus 5% * 5 months = 25% of $22,840, which is $5,710. However, the late-payment penalty also accrues from May 1, 2020, until the tax is paid, at 0.5% per month. For the first 5 months (up to the filing date), this penalty is 0.5% * 5 months = 2.5% of $22,840, which is $571. The question does not specify payment with the filing, so the calculation stops with the filing penalties. The total initial penalty is the sum of the late-filing penalty ($5,710) and the late-payment penalty for the first 5 months ($571), totaling $6,281. However, none of the provided options match this calculation, indicating a possible misunderstanding in the question's premise or an error in calculation. Given the options, the closest to a reasonable interpretation of penalties based on the provided details would be option C, but it requires assuming a different calculation basis or a mistake in the question's setup or the answer options.

Ms Dela Filed Her Unextended 2019 Form 1040 on November