Final answer:
To determine the amount of the late filing and late payment penalties, we calculate the penalties based on the number of months or years late and the penalty rates. In scenario a, the total penalties for Oscar are $800. In scenario b, the penalties would be substantial due to the larger tax liability.
Step-by-step explanation:
To determine the amount of the late filing and late payment penalties, we can use the information provided: the credit card company charges $10 when a payment is late and $5 a day each day the payment remains unpaid.
a. Oscar filed his tax return and paid his $3,600 tax liability five months late. To calculate the late filing penalty, we multiply the number of months late (5) by the late filing penalty rate ($10), giving us a penalty of $50. To calculate the late payment penalty, we multiply the number of days late (5 months = 150 days) by the late payment penalty rate ($5), giving us a penalty of $750. Therefore, the total late filing and late payment penalties for Oscar are $50 + $750 = $800.
b. The taxpayer did not file a tax return or pay his $13,400 in taxes for several years. Without the specific information about the number of years and months late, we cannot calculate the exact penalties as it would depend on the specific time period. However, based on the given information, we can assume that the penalties would be much higher than in the previous example, as the tax liability is significantly higher. The late filing penalty would be calculated in the same way as in the previous example, but multiplied by the number of years and months late. The late payment penalty would be calculated based on the number of days late, multiplied by the late payment penalty rate. Therefore, we can conclude that the late filing and late payment penalties for the taxpayer in scenario b would be substantial.