Discussion:Late payment penalty on amended return
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Discussion Forum Index --> Tax Questions --> Late payment penalty on amended return
Ksnoopytax (talk|edits) said: | 17 September 2007 |
| I have a client for which I filed a 2005 1120X return to show additional tax due which was recently discovered by the client. Along with the tax return and payment of additional tax owed in the amount of $35,000, I prepared a letter requesting an abatement of the late payment penalties. Today I received a letter from the IRS which is charging interest on the $35,000 but no late payment penalty although it stated nothing about the penalties being abated. I called the IRS and the representative told me that since we paid the tax with the amended return, there would be no late payment penalties. Wasn't the tax originally due on 03/15/06 and the penalties should reflect this? I'm not complaining for my client, just questioning the logic. | |
| 18 September 2007 | |
| Late payment penalties are based on the tax shown on the original return. See Sec. 6651(a)(2). In contrast, late filing penalties are based on the amount "required to be shown" on the return. Thus, if your client filed the corporate return late, the late filing penalty would be increased by filing an amended return. | |
Ksnoopytax (talk|edits) said: | 19 September 2007 |
| thanks for the reply. | |
| 19 September 2007 | |
| Late payment penalty on tax "not reported on a return" which includes and audit or amended return, does not start to accrue until 11 days after notice and demand (that's the first bill) and is covered by Sec 6651(a)(3) | |
| 16 May 2008 | |
| I am amending a new clients 2006 return to reflect 2735 of additional tax due. The 2007 return shows a refund of 2860. He would like the 2007 applied to 2006 so my suggestion was to file the 2006 first & later file the 2007. IRS would automatically apply & keep the 2007. My question is - what penalty might be associated with not paying the 2006 amount due with the 1040x? I would have dificulty coming up with the money. I have the interest figured out. | |
| 16 May 2008 | |
| why do you have to come up with the money for your client's return? | |
| 16 May 2008 | |
| Keven5 - haha - I am typing too quickly as usual - I would not, he would. the question remains the same. As an aside he is the 3rd person this year for whom I have prepared an amended return based upon their own preparation and lack of undertanding of rental properties. Incorrect property basis, incorrect forms & incorrect interest. Its amazing. These are bright people & well educated in their field. When I explain the error - I think I can see the lightbulbs going off. | |
| 16 May 2008 | |
| OK
to answer your question, you normally let the IRS assess any penalties, then when the client receives the bill for it, you can double-check the math. You normally don't volunteer it (except for the Forms 2210 & 5329 penalties). | |
| 16 May 2008 | |
| he wants to know, so I will tell him. I would not recommend sending in the penalty and when paying would recommend indicating on the check that payment is for tax only, however, he won't have this option if sending in nothing while hoping the 2007 refund takes care of it. I estimate that he will owe approximately $450 additional. Thanks. | |
Death&Taxes (talk|edits) said: | 16 May 2008 |
| He sends it in without payment; IRS assesses additional tax plus interest. If this balance is not paid by the date prescribed for the payment of this tax, he begins to incur the penalty. | |
| 16 May 2008 | |
| Tax on an amended return is "tax not reported on a return" and is the same as an audit deficiency. Late payment penalty on tax not reported on a return is covered by IRC 6651(a)(3) and does not start to accrue until 11 days after a bill for the tax is sent. | |
| 16 May 2008 | |
| Mscash - would a month between the filing of the 2006 & the efiling of the 2007 be adequate or would you wait for the notice to efile 2007? | |
| 16 May 2008 | |
| Szptax, if the original return was filed on a timely basis, there should be no penalties assessed on the amended return. I generally compute the interest for my clients (which is usually lower than what the IRS computes). | |
| 16 May 2008 | |
| Filing or efiling of subsequent returns are irrelevant to the issue of late payment penalty due or not due on an earlier year. | |
Death&Taxes (talk|edits) said: | 16 May 2008 |
| I take it SZP does not want his client to receive the refund check for 2007 and wants IRS to secure payment of the old debt. I think we all have client where the money from the refund will be flushed down the toilet, leaving them still owing the balance due on the old return. I doubt that there is any way to foolproof this sequence. If he had already been billed, you might have alerted IRS to secure the refund. | |
| 4 December 2009 | |
| I have a situation where on the original return income was underreported due to a expense error on the S-Corp return (K-1) flow through. Their K-1 income a cwill increase by $54,000 with the correction. They filed original return timely and recieved refund, and now will owe back over $7,000 on the amendment 8 months after the due date. Would penalty be due on this or just interest? If so how much would I & P be for that amount of tax? | |
Death&Taxes (talk|edits) said: | 4 December 2009 |
| The answer is the same as mine above to SZP, except in your case he will pay the tax with the amendment. | |
| 4 December 2009 | |
| No penalties unless the tax is not paid within 21 days of notice and demand for the $7,000. | |
| 4 December 2009 | |
| Late payment penalty on an amended return and on audit deficiencies is charge based on IRC 6651(a)(3) where the due date for payment is within 10 days of billing. Your client paid the tax before that date so the penalty does not apply. Penalty for tax due on a return falls under IRC 6651(a)(2). | |
| 5 December 2009 | |
| In the past few months, I have had numerous clients place calls to the IRS to request penalty waiver OVER THE PHONE -- and the IRS has waived the penalties! Don't pay any penalties without first asking for an abatement. Just have your client make the call. | |
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