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Tax penalty on interest?

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    Tax penalty on interest?

    I have a client that had $25K in interest in 2007. The tax return was filed prior to April 15th. No Federal income tax was withheld from any of the 1099-int's. Is the interest still subject to a tax penalty?

    #2
    Do you mean an underpayment penalty?

    Then yes, unless taxpayer meets on of the rules not to be required to pay.
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      #3
      When you calculate the penalty

      don't forget to put in information about the income and tax from 06 or the fact that there was no requirement to file in 06. Also don't forget the long method of calculating the penalty and if the interest was received mostly late in the year check out the annualized income method. I haven't done either of the last two in a few years but the last time I had to the IRS instructions to Form 2106 were a very present help in time of need.

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