Billy, a calendar-year taxpayer, files his current year individual tax return on August 17 of the following year without having requested an extension. His return reports an amount due of $5,000. Billy pays this amount on November 23 of the following year. What are Billy's penalties for his failure to file and his failure to pay his tax on time? Assume Billy did not commit fraud.
What will be an ideal response?
Failure-to-pay penalty —
0.005 × $5,000 × 8 months $ 200
Failure-to-file penalty —
0.05 × $5,000 × 5 months $1,250
Minus: failure-to-pay penalty for same time
period — 0.005 × $5,000 × 5 months ( 125) 1,125
Total penalties $1,325
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