Scott files his tax return 65 days after the due date.Along with the return, Scott remits a check for $50,000 which is the balance of the tax owed.Disregarding the interest element, Scott's total failure to file and to pay penalties are:
A)$8,250.
B)$7,500.
C)$6,000.
D)$750.
E)None of the above.

Question

Quizplus · Accepted Answer

The failure to file penalty is calculated as 5% of the unpaid tax per month or part of a month up to a maximum of 25%. In this case, since Scott filed his return 65 days after the due date, he is subject to a failure to file penalty of 15% (5% for each of the first 3 months).

The failure to pay penalty is calculated as 0.5% of the unpaid tax per month or part of a month up to a maximum of 25%. In this case, since Scott paid the balance of his tax owed along with his return, he is not subject to a failure to pay penalty.

Therefore, Scott's total penalty is the failure to file penalty of 15%, which is calculated as follows:

$50,000 (tax owed) x 0.05 (penalty rate) x 3 months = $7,500

Therefore, the answer is B) $7,500.

Scott Files His Tax Return 65 Days After the Due