Does filing extension with zero's avoid failure to file penalties?
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Zee: Thanks for responding to the "debate" comment, just to clarify things. This subject is too important for anyone to get distracted by misinterpreted 'tone of voice" or a poorly worded reply.
First of all, let's get the penalties clear. As I understand it, he FTF penalty is 5% per month and it maxes out at 25%. The FTP penalty is only .5% per month (1/2 of one percent). It also maxes out at 25% if it runs on its own long enough ( 50 months). There's some coordination between the two when they both apply to a late-filed return, but a valid extension takes the 5% per month FTF penalty completely off the table, provided the extended due date is adhered to. The extension has no effect on the interest or FTP penalty, but I'd much rather be dealing with .5% than 5%.
The first & second paragraphs of page 3 of the 4868 apply only to the FTP penalty. They don't have anything to do with the FTF penalty as I understand them.
Finally, the reference to using last year's tax liability is mentioned only as a last resort, when it's clear that not enough information is available to even hazard a guess. Using last year's liability is better than pulling a figure out of thin air. I've done that a few times when the taxpayer was ill or otherwise indisposed and I just had no information on which to base an estimate. That's why I continue to say I'd never be comfortable with an extension showing all zeros, unless I was near 100% certain that all zeros was a factually accurate estimate.Comment
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