Question 1

A taxpayer failed to file their tax return by the due date (including extensions). The tax due was $10,000. The return was filed 40 days late. The taxpayer had no reasonable cause. What is the total failure-to-file and failure-to-pay penalty assessed?

Accepted Answer

1. Determine months late (40 days = 2 months). 2. FTF penalty = 5% per month. 3. FTP penalty = 0.5% per month. 4. IMPORTANT: Reduce FTF by FTP amount. Net total is 5% per month.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Forgetting that a partial month counts as a full month. Forgetting to reduce the FTF penalty by the FTP penalty.

A taxpayer failed to file their tax return by the due date (including extensions). The tax due was $10,000. The return was filed 40 days late. The taxpayer had no reasonable cause. What is the total failure-to-file and failure-to-pay penalty assessed?

How to approach this question

Full Answer

Common mistakes

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