Extension

[gman]

Taxpayer filed an extension. Taxpayer had withholding from distribution and job, but
Taxpayer owes 30,000. What penalties or interest will be added to tax
due?

[Bees Knees]

TTB, page 15-2:

failure to pay penalty, 0.5% of unpaid balance per month, maximum 25%

underpayment of estimated tax

interest on underpayment, 7% annual interest as of the 4th Qt. of 2005, compounded daily (don't know what current interest rate is)

possible loss of extension status if the extension estimate was way off base, resulting in a failure to file penalty of 5% of unpaid balance per month, maximum 25%...

[Uncle Sam]

Extension

First, you have to determine if sufficient taxes were paid in during the course of the year to avoid the Form 2210 Underestimation Penalty.
So long as the taxpayer meets the lower of:
1) 100% of last year's tax liability, except if AGI exceeds $ 150,000 then 110%
OR
2) 90% of the current year's tax liability

Then no penalty is due
However, interest would be due from April 15, 2006 until date of payment at the applicable Federal rate (I don't recall the % amount) of the unpaid balance

[Matt Sova]

Penalty and Interest

The penalties and interest explained above by US and Bees are correct. The interest rates are as follows:

2Q, 3Q 05 6%
4Q 05 - 2Q 06 7%
3Q and 4Q 06 8%