Question

David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000. which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:

a.$400.
b.$3,600.
c.$4,000.
d.$4,400.
e.None of these choices are correct.

Answer 1

The total failure to file penalty for David is $2,000 ($40,000 × 5%). The total failure to file and to pay penalties combined would be $2,000. Correct option is d.

Step-by-step explanation:

The total failure to file penalty is calculated based on the amount owed and the number of days late in filing the tax return. In this case, since David files his tax return 45 days after the due date, the penalty is 5% of the tax owed per month, up to a maximum of 25%. The total failure to pay penalty is calculated based on the amount owed and the number of days late in paying the tax. In this case, since David remits the balance of $40,000 with the return, there is no failure to pay penalty.

Therefore, the total failure to file penalty for David is $2,000 ($40,000 × 5%). The total failure to file and to pay penalties combined would be $2,000.

So, the correct answer is d.$4,400.