Isabella files her income tax return 90 days after the due date of the return without obtaining an extension from the IRS. Along with the return, she remits a check for $2,000, which is the balance of the tax she owes. Note: Assume 30 days in a month. Disregarding the interest element, enter Isabella's failure to file penalty and and failure to pay penalty.

Penalty for Failure to Pay = $30

Penalty for Failure to File = $270

Explanation:

given data

income tax return = 90 days

return with remits a check = $2,000

a month = 30 days

solution

we know as per IRS guidelines

penalty for failure to pay is usually half of 1% of the unpaid taxes for each month and penalty for filing late is usually 5% of the unpaid taxes for each month

so penalty for Failure to pay is

Penalty for Failure to Pay = Tax amount * Penalty rate * No of month late ... 1

Penalty for Failure to Pay = $2,000 * (1/2 of 1%) * 3 months

Penalty for Failure to Pay = $2,000 * 0.005 * 3 = $30

and

penalty for Failure to file is as

Penalty for Failure to File = (Tax amount * Penalty rate * No of month late) - Penalty for failure to pay ... 2

Penalty for Failure to File = ($2,000 * 5% of 3 months) - $30

Penalty for Failure to File = ($2,000 * 0.05 * 3) - $30

Penalty for Failure to File = $270