Late File Penalties

[S T]

Client did not file the 4/15/06 - 2005 extension on time. Filed the extension and made an extension payment which was cashed on 5/5/06. Extension payment created a refund when return was filed, so all tax paid.

Question regarding the late file penalty, is it calculated from 4/15/06 to the date of the extension payment 5/5/06, or is it calculated from 4/15/06 to date the tax return is filed.

IRS is charging a late file penalty from 4/15/06 to date return was filed on the amount of the tax liability.

Would the late pay penalty be from 4/15/06 - 5/5/06, and the late file penalty also be for that period as the tax had been paid??

Thanks,

Sandy

[Bird Legs]

Late filing penalty

TTB page 15-2: 1. 5% of unpaid balance per month, maximum 25%
2. More than 60 days late minimum of $100. or 100% of
tax due on return.
3. No penalty if taxpayer is due a refund.
4. Failure to file penalty is reduced by failure to pay
penalty for any month that both penalties apply

IRC 6651(a)(1)
Really do not know the answer to this one.

[Unregistered]

Since your taxpayer did not have a VALID extension, I believe the late filing penalty will be assessed until the filing date (since this is after the filing date & there is no valid extension, the filing date is the date the IRS receives the return).

I would suggest you go to the IRS website and look at the IRM. It has decent detail on the late filing penalty & the effect of an extension. Start at IRM 20.1.2.1.2

New York Enrolled Agent

[Kram BergGold]

Get the penalty removed

ST, get a P of A and call the IRS Practitioner Priority Line. Tell the person who answers that someone told you about some program to remove late filing and late payment penalties. If your client meets certain parameters the penalties will be waived.

[fliszt]

late fee

Sandy, I agree with Kram. I have run into this before too and called the regular help line (not practitioner help line) and first person to "help" would not do anything. I called back two more times and on the 3rd attempt, got someone extremely nice and she "offered" to wipe off the interest charge(after I explained the situation - them not being late in past, won't be in furture, etc). So I think it will be up to the agent you speak to, to determine if the interest charge will be removed.
Larry M.

[jainen]

remove the interest

>>wipe off the interest charge<<

Penalty, maybe. I don't think it is legal to remove the interest.

[fliszt]

jainen, you are

correct in your statement. But there are exceptions to the interest waiver. Sorry to take so long to post this, but had to go back a few years to clients file. I had requested interest and penalty be abated. The notice from the state reads in part: "Dear Taxpayer, This is in response to the request for abatement ...." "Based on the information provided with the request the determination has been made to approve abatement of penalties in the amount of ...." "There is no statutory provision for abatement of interest."
Now the feds did differently. Notice received from IRS "We changed your return for the above tax period. You may want to check your figures against ours" "Total income: xxx; Less Total deductions $xxx; LESS penalty $xxx; LESS Interest $xxx" " Total subtractions from Amount of Tax ...."
So, I agree with you that interest is not waived, but there are some circumstance that will let the agent exercise some latitude. (I guess). The agent put me on hold for several minutes and then came back to phone and said here's what we're going to do.... I suppose she checked with her supervisor for approval. I spoke to her supervisor after business was concluded and gave the agent a glowing report and asked supervisor if I could somehow get her (agent) direct phone line. Of course the answer was no, but I tried.
Hope everyone had a very nice Thanksgiving and thanks again for your posts jainen.
Larry M

[Armando Beaujolais]

There was no extension. It was filed late, it does not exist.

It's certainly not a bad thing to call and get penalties and interest abated for your client. I'm sure if you get the right person they'll be able to file it under some reasonable cause provision. I'm skeptical that it can be done with any consistency of success or time spent.

[jainen]

also rescinded

>>LESS Interest $xxx<<

When penalty was abated, the interest allocated to that amount was also rescinded.

[Unregistered]

Jainen is correct. Interest is calculated on the late filing or the late payment of the underlying tax liability and also calculated on any penalties assessed as a result. If you reduce the tax liability and/or the resulting penalties, then the interest will be reduced as a routine matter. Thus, the interest was not waived, it was simply reduced by reason of the reduction in tax and/or penalty.

There is a statutory provision to abate interest under §6404(e) but that section requires that the interest is attributable to unreasonable IRS delay or error.

New York Enrolled Agent

[fliszt]

I follow

you now. Thanks very much for your posts Armando, jainen and NYEA. And I agree that it will not be a regular occurance. I just did the post for ST to see so she might try that route if she had not thought of it. I know all of you gentlemen and ladies are very, very sharp. And since I'm older than OldJack and new at this, I hope you'll excuse my naivete
Larry M.

[jainen]

one of my favorite things

>>I hope you'll excuse my naivete<<

Don't mention it. Naivete is one of my favorite things.

[Black Bart]

Well; don't be

Naivete is one of my favorite things.

a hog about it. Where can I get some of that stuff at a reasonable price (you wouldn't believe what Wal-Mart gets for a quart of Fraynch perfume here)?