Mr. and Mrs. Chung filed their unextended 2012 Form 1040 on May 30, 2013, and had no reasonable cause for the delinquency. The return showed a $10,479 balance of tax due. Compute the Chungs' late-filing and late-payment penalty.

Question

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The late-filing penalty is 5% of the unpaid tax for each month or part of a month that the return is late, up to a maximum of 25%. Since the return was filed more than 60 days late, the minimum penalty is the smaller of $135 or 100% of the tax due. Therefore, the late-filing penalty is $1,048 (5% x $10,479). The late-payment penalty is 0.5% of the unpaid tax for each month or part of a month that the tax remains unpaid, up to a maximum of 25%. The Chungs owe $10,479 in tax, so the late-payment penalty is $52.40 (0.5% x $10,479).

Mr and Mrs