Question

Problem 12-6 Interest and Penalties (LO 12.3) For each of the following situations, select the nature of the penalty and calculate the amount that could be imposed. Description of the Penalty Penalty Amount Filing a frivolous tax return a. Larry is a tax protester and files his tax return in the name of "Mickey Mouse." Bad check b. Anne writes a check for $900 in payment of her taxes that she knows will not clear the bank due to insufficient funds in her account. C. Accuracy-related penalty, substantial understatement $ Gerald understated his tax liability by $10,000. The total amount of tax that should have been shown on his return was $70,000.

Answer 1

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Ans a penalty Amount = $5000 b) Penalty Amount = $.18 * (900x2 %) Note * Il value of check is below $1250 the penalty will be lower of a $25 whichever is lower bo value of checks (0%) % of value of 2 check I Gerald will be charged 20% negligence penalty = $10,0w x 20% = $200 V

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