Late payment charge

[arlo]

Client was 38 days late in paying his 2021 taxex of $862.00. IRS wants $367.00 in late payment fee. Evan at 25% (215) it seems high. Any help ?

[Rapid Robert]

Are you sure that is entirely a failure to pay penalty and nothing else?

First time abatement should work for FTF and/or FTP penalties if taxpayer has no prior lateness in most recent 3 years.

[ATSMAN]

Have you seen the IRS notice or bill. It should spell it out. I think there is interest on top of the penalty.

[arlo]

I have the notice. that says: 04-15-2022 --05-23-2022 Days 38 Interest rate 4.0% Interest Factor .004172838 Amount Due 367.50 Interest charge 1.53 Total 369.03 under the interest section.
Client did not pay until 05-23-2022. Gogle says penalty is 5% per month up to 25% on unpaid amount. unpaid amount was $862.00.
It also says the We found an error on your 2021 firn 1040 wihich affects the following area of your return ADDITIONAL TAX. Taxable income was 63048 so tax is 9614.00 so it is not an incorrect tax.
what am I missing?

[Rapid Robert]

Underpayment of estimated tax? That is considered an "addition to tax".

[Anarchrist]

If they found an error and charged additional tax, then the balance due of $367.50 isn't from a late payment fee.

[ATSMAN]

Have you run a form 2210 in your tax software. Generally when one of my client pays late my software will calculate the underpayment penalty and interest for the dates. If the client is paying online on the date calculated it is 99% correct. If they are mailing a check then there will be an additional amount for the transit time.

If there was an adjustment in the 1040 for any line numbers, expect another notice showing the correction. Alternatively pull a full transcript. I would suggest that.

[Beersheba]

It also says the We found an error on your 2021 firn 1040 wihich affects the following area of your return ADDITIONAL TAX. Taxable income was 63048 so tax is 9614.00 so it is not an incorrect tax.
what am I missing?

You could be missing a number of different things. Self-employment tax. 10% penalty on early retirement withdrawal, ACA tax on insurance. This is to name just a few. If you have the notice, it should delineate the additional tax and state what it is.

[Rapid Robert]

The underpayment of estimated tax penalty (Form 2210) does not extend beyond the original filing date (4/18) so it would not be affected by FTP of the balance due, but it might not have been included in the original return as filed so the IRS added it. Or, some other "addition to tax" as Beersheba mentioned.