Noel, a calendar-year taxpayer, filed his 2016 income tax return on October 20, 2017, paying an amount due of $2,000. On April 1, 2017, he had obtained a six- month extension of time in which to file his return. However, he could not assert a reasonable cause for failing to file the return by October 15, 2017 (the extended due date), nor did he show any reasonable cause for failing to pay the tax that was due on April 15, 2017. Noel's failure to file was not fraudulent. The penalty for failure-to-pay tax is:

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The penalty for failure-to-pay tax is generally 0.5% of the unpaid tax per month, up to a maximum of 25%. Since Noel did not pay the tax that was due on April 15, 2017, he is subject to this penalty for six months (April through September). The penalty calculation is $2,000 x 0.5% x 6 = $60. However, the penalty is reduced to 0.25% per month if the taxpayer has an installment agreement in place. Since there is no mention of Noel having an installment agreement, the penalty is $60, which is closest to answer choice C ($70) and therefore the best choice. Answer choices A, B, and D are all lower than the correct penalty amount.

Noel, a Calendar-Year Taxpayer, Filed His 2016 Income Tax Return