Noel, a calendar-year taxpayer, filed his 2013 income tax return on October 20, 2014, paying an amount due of $2,000. On April 1, 2014, 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, 2014(the extended due date), nor did he show any reasonable cause for failing to pay the tax that was due on April 15, 2014. 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 0.5% of the tax due per month, or part of a month, that the tax remains unpaid, up to a maximum of 25%. In this case, the tax was due on April 15, 2014, and was not paid until October 20, 2014, which is a six-month period. Therefore, the penalty is 6 x 0.5% = 3%. Since the amount due was $2,000, the penalty is $60 (3% x $2,000). However, the penalty is reduced by the amount of any failure-to-file penalty for the same period, which is calculated separately. The penalty for failure-to-file tax is 5% of the tax due per month, or part of a month, that the return is late, up to a maximum of 25%. In this case, the return was filed five days late, so the penalty for failure-to-file tax is 0.25% (5% x 5/30). Since the tax due was $2,000, the penalty for failure-to-file tax is $5 (0.25% x $2,000). Therefore, the total penalty is $60 - $5 = $55, which is closest to choice C, $70.

Noel, a Calendar-Year Taxpayer, Filed His 2013 Income Tax Return