Gerald requests an extension for filing his last year's individual income tax return. His tax liability is $10,000, of which $8,000 was withheld, leaving a balance due of $2,000 when he files on August 1 of the current year. His penalty for failure to pay the tax on time is
A)$0.
B)$40.
C)$300.
D)$400.

Question

Quizplus · Accepted Answer

The penalty for failure to pay the tax on time is calculated based on the amount of tax due and the number of days late. The penalty is usually 0.5% per month or part of a month, up to a maximum of 25%. In this case, Gerald filed his return and paid the balance due on August 1, which is four months late (April 15 is the original due date). Therefore, the penalty is 2% (0.5% x 4 months) of the tax due, which is $40 ($2,000 x 2%). Therefore, the best choice is B.

Gerald Requests an Extension for Filing His Last Year's Individual