Question

In case of underpayment of taxes, if the deficiency is not paid in a timely fashion, interest is imposed on the unpaid amount for a period that begins on the date of:

a. Filing return and ends on the date of payment or the last working day of the respective year, whichever is later.
b. Filing return and ends on the date of payment.
c. The notice and demand and ends on the date of payment.
d. The notice and demand and ends on the date when the taxpayer receives the notice.

Answer 1

Interest on underpaid taxes starts accruing from the date of the notice and demand until the date of payment. Taxes fund government services and contribute to the determination of an annual budget deficit or surplus.

Step-by-step explanation:

Underpayment of Taxes and Interest Accrual

In the event of an underpayment of taxes, if the deficiency is not paid promptly, interest is imposed on the unpaid amount. The period for the accrual of interest begins on the date of the notice and demand and lasts until the date of payment. It is crucial to comprehend that this interest is a penalty for not meeting your tax obligations on time. The date on which one must pay their taxes is typically April 15th. If taxes are overpaid, a tax refund is issued, which is the difference between what was paid and what was actually owed to the government.

Furthermore, understanding taxes helps to appreciate how they finance various government programs and services. Taxes contribute to budget revenues, which, when combined with government spending, determine the annual budget deficit or surplus. A budget deficit occurs when spending exceeds revenue, necessitating borrowing to cover the shortfall.