Gene files his tax return 45 days after the due date.Along with the return,Gene remits a check for $40,000 which is the balance of the tax owed.Disregarding the interest element,Gene's total failure to file and to pay penalties are:

Question

Quizplus · Accepted Answer

The failure to file penalty is 5% per month (or part of a month) on the unpaid tax, up to a maximum of 25%. Since Gene filed his return 45 days after the due date, the failure to file penalty is 5% x 2 = 10%.

The failure to pay penalty is 0.5% per month (or part of a month) on the unpaid tax, up to a maximum of 25%. Since Gene paid the balance of the tax owed 45 days after the due date, the failure to pay penalty is 0.5% x 2 = 1%.

Therefore, the total penalties are 10% + 1% = 11% of the unpaid tax. The unpaid tax is $40,000, so the total penalties are 11% x $40,000 = $4,400.

Therefore, the correct answer is D. $4,000.

Gene Files His Tax Return 45 Days After the Due