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Flashcards in Taxes: Compliance Responsibilities Deck (12)
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1

Taxes:
Compliance Responsibilities
Filing Requirements

Filing Requirements
- individual must file if GI - Standard Deduction - Personal Exemption = positiver
- includes exemption for over 65
- or if net self employment income > $400

2

Taxes:
Compliance Responsibilities
Filing Deadlines

Filing Deadlines
- Individual: 15th of 4th month after close of tax year (Can have 6 month extension)
- Corp: 15th day of 3rd month after YE (6 month extension)
- S Corp: 15th of 3rd month after close of tax year (Can have 6 month extension)
- Partnership: 15th of 4th month after close of tax year (Can have 5 month extension)
- Fiduciaries (Estate & Trust): 15th of 4th month after close of tax year (Can have 5 month extension)
- Tax-Exempt: 15th of 5th month after YE (3+ month extension)
- Estate Tax: due 9 months after death (6 month extension)
- in all cases est tax is due on date return due

3

Taxes:
Compliance Responsibilities
Penalties

Penalties
1. Nonfiling Penalty
2. Underpayment Penalty
3. Nonpayment Penalty
4. Accuracy Penalty

4

Taxes:
Compliance Responsibilities
Nonfiling Penalty

Nonfiling Penalty
- not filed by due date
- 5% per month of tax due
- max = 25% tax due
- min = lesser of: $135 or amount of tax due
- if fraudulent, penalty is 15% per month, max 75%

5

Taxes:
Compliance Responsibilities
Underpayment Penalty
Required Payments for Individuals

Underpayment Penalty
Required Payments for Individuals
- failure to remit taxes during year
- no penalty if tax due less than $1k
- no penalty if:
- 90% current year tax is paid
- 100% of last year's taxes
- if AGI > $150k = 110% of last year's taxes
- annualization exception

6

Taxes:
Compliance Responsibilities
Underpayment Penalty
Required Corporate Payments

Underpayment Penalty
Required Corporate Payments
- est payments are due 4/15, 6/15, 9/15, 12/15
- no est tax payments if payments equal lesser of:
- 100% current year tax
- 100% of previous year tax
- or annualization exception met
- if more than $1M TI in any 3 previous years, exception only for Q1 installment
- previous year NOL cannot offset

7

Taxes:
Compliance Responsibilities
Underpayment Penalty
Required Corporate Payments
Annualization Method

Underpayment Penalty
Required Corporate Payments
Annualization Method
- for individuals and corporations
- amount due with installment:
- tax due for month before installment less
- amount required to be paid for previous installments
- different exceptions may be used for different installments
- if less than under regular, subject to recapture

8

Taxes:
Compliance Responsibilities
Nonpayment Penalty

Nonpayment Penalty
- tax shown on return not paid by filing date
- interest on late payments starts on due date and calc'ed using federal ST interest rate
- penalty of 0.5% per month up to 25%
- if both non-payment and non-filing, mac penalty is 5% per month
- neither if reasonable cause: death, serious illness, ect

9

Taxes:
Compliance Responsibilities
Accuracy Penalty

Accuracy Penalty
- underpay because of inaccurate position
- 20% of tax due to inaccuracy
- waived if reasonable basis for position
- penalty for gross overstatement of value or basis, 20% for substantial misvaluation and 40% gross
- penalty for fraud is 75% understatement in addition to 50% interest

10

Taxes:
Compliance Responsibilities
Statute of Limitations

Statute of Limitations
- Primary: 3 years after due date/filing date, whichever later
Exceptions
1. 6 years if more than 25% GI understated
- never expires if fraud or fails to file
2. Form 1040X (erroneous taxes by indiv) is later of:
- 2 years from payment
- 3 years date return filed (or April 15 if filed early)

11

Taxes:
Compliance Responsibilities
Preparer Penalties

Preparer Penalties
- apply to all tax return preparers
- unreasonable position pay greater of:
- $1k or
- 50% income of preparer from return
Exception
- if position was disclosed and had reasonable basis
- applies to reportable transactions and tax shelter only if more reasonable than not
- reasonable cause and good faith exceptions apply
- willful attempt: greater of $5k or 50% income earned

12

Taxes:
Compliance Responsibilities
Preparer Penalties
Additional Penalties

Preparer Penalties
Additional Penalties
- not signing a return done for compensation
- not providing a copy of return for taxpayer
- not keeping list of returns filed
- endorsing or negotiating refund check
- disclosing info from return
- $500 if not due diligence on earned income credit
- may not base fees on % of refund
-

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