Tax Penalties (Fall 2011)

Tax Penalties (Fall 2011) - 33:010:421 Income Tax...

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33:010:421 Income Tax Accounting, Fall 2010 Tax Penalties S ee pages 4-36 to 4-40 of our textbook Penalty for paying insufficient estimated tax and/or withholding during the course of a year: To avoid this penalty, total pre-payments (i.e., estimated tax payments and withholding from salary) must generally equal or exceed the lesser of the following: 1. 90% of the tax liability shown on the return, or, 2. 100% of the tax shown on the return for the individual for the preceding year. (110% if AGI in the prior year exceeds $150,000). Penalty for failure to file a return by the due date : In the event a tax return is not filed by the due date (including extensions), the IRS will impose a failure to file penalty of 5% per month -- or any fraction of a month-- up to a maximum of 25%, on the amount of tax due on the return. Penalty for failure to pay at least 90% of the tax bv the due date: The failure to pay penalty is ½ of 1% per month – or any fraction of a month – up to a maximum of 25%, on the amount of tax due on the return. There is no penalty for failure to pay if form 4868 “Application for Automatic Extension of Time to file U.S. Individual Tax Return” is filed and the tax due is equal or less than 10% of the total tax liability shown on the return. EXAMPLE 1
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Tax Penalties (Fall 2011) - 33:010:421 Income Tax...

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