penalty for late filing

[swacpa]

Hello I have a client that owed $200,000 at extension time 2022 and did not have the funds to pay the tax. We extended his return. Come October 15 2023, he only had $40,000 to pay and was still missing some info so he paid in $40,000 at that time. We could not file his return until January 2024 when the IRS efile system cam back up. On the penalty to file does it start after the extension date and is the unpaid balance the penalty is assessed on the $200,000 or should it only be on the $160,000, after his payment? He did not pay in 90% of the taxes he owed by 4-15-23.

Thank You

Steve A.

[TaxGuyBill · Accepted solution]

The failure-to-file penalty starts the day after the extended due date (usually October 16th).  But the failure-to-file penalty is based on the unpaid amount as of the PAYMENT due date (April 15th).

In other words, the failure-to-file penalty is based on the unpaid $200,000 that was due by April 15th.

Plus of course the failure-to-pay penalty and interest also applies.

[BobKamman]

He may qualify for First Time Abatement.  I don't think there's a maximum dollar amount on that, for FF penalty.  

[George4Tacks]

I know silly question. Obviously I missed something, but why did you not file a tax return with little or no payment ON TIME? 

[BobKamman]

@George4Tacks You missed where the post stated, "was still missing some info."  Not a good excuse, just the excuse.  File with the best estimate, and amend later.  

[swacpa]

Hello

Thanks everyone for your thoughts. He did have material items missing so we were not sure he would be close plus he did not have any funds. Unfortunately he already used the first time abatement before he became a client of ours. Was hoping he would save him some dollars on the penalty.

Steve