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USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1236
Experience:  US Taxation specialist.
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I just received a late k-1 for calender year 2012 showing my

Customer Question

I just received a late k-1 for calender year 2012 showing my share of ordinary profit of $90k -i am at the top of the 25% tax bracket in 2012 before the $90k-please address relevant issues including what are my estimated penalties (assuming next highest bracket and no prior 2012 credit carryover), what years need amending and why and how can i mitigate any penalties/interest late generated k-1 receipt.
Submitted: 2 months ago.
Category: Tax
Expert:  USTaxAdvising replied 2 months ago.


Sorry to hear of your situation. First off the additional 90K will presumably put you in the 28% tax bracket; therefore assuming the total tax owing is strictly from the additional K1 (i.e. there is no additional AMT tax) your estimated federal tax owing would be approximately $25,200. You are correct to think this would be considered late payment and the interest penalty on it is .5% or approximately $126. You could perhaps attach a statement stating that you filed your original return with all information available to you at the time of filing and therefore request that the interest penalty be abated. The IRS may grant this but it is to the discretion of the agent.

I would think that the only years that need amending would be your 2012 return assuming you have no carryovers into 2012 that changed in 2012 as a result of the 90K. I would think that 2013-2015 returns should be fine unless the 90K resulted in a carryforward to 2013. If that is the case then 2013 would need to be amended as well.

I hope this helps. Please let me know if you have any doubts on anything and I will try and respond as soon as possible.

Best regards,

Customer: replied 2 months ago.
Hmmn what is the total interest penalty and how is it calculated. Does the interest rate change month to month. Are there other late filing penalties or only an interest penalty?
Expert:  USTaxAdvising replied 2 months ago.

The total interest penalty would be calculated by taking the amount of tax payable on April 15, 2013 and multiplying it by the IRS interest rate of approximately .5% and then again by 36 months as it has been outstanding for approximately 3 years.

Per the Form 1040 filing instructions:

Late payment of tax. If you pay your taxes late, the penalty is usually 1/2 of 1% of the unpaid amount for each month or part of a month the tax isn't paid. The penalty can be as much as 25% of the unpaid amount. It applies to any unpaid tax on the return. This penalty is in addition to interest charges on late payments.

Since the late payment interest for one month is $126 then the total amount for 3 years would be approximately $4,536.

Note that there are late filing penalties but these won't apply as you filed your return for 2012 in 2013 but just never reported the K1 income. Your return was filed and is not late (just filed incorrectly).

I hope this helps. Please let me know if you have any doubts on anything and I will try and respond as soon as possible.