The penalties and interest that are imposed on late returns
are as follows:
1. Late filing
penalty - 5% per month, not to exceed 25% of the total tax due.
2. Late payment penalty - .05% per month, not to exceed 25% of the total tax due.
3. Interest - The rate
and is equal to the short term rate plus 3%. Interest is compounded daily.
Because of the interest rate compounding factor and the fact that the interest rate changes quarterly, it will be impossible to give you an exact estimate. However, just assuming an average interest rate of 6%, this is what you might expect to pay.
On the $53.00 that he owes from 2002, his penalties and interest will be around $50.00. On the $2,583 that he owes for 2006, his penalties and interest should be around $1,300.
He will not owe any penalties or interest for the years 2003 and 2005 since he had refunds coming in those years.
The late filing penalty is the stiffest penalty, and automatically accounts for an additional 25% of the tax due if you are more than 5 months late in filing.
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