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Late filing penalties

Technical topics regarding tax preparation.
#1
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Client on extension is finally ready to file. As I read it, late filing penalty is 5% for any month or part of a month.

So therefore is it correct that his penalty will be 20% since he is late for part of October, all of November, all of December and part of January?
 

#2
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If he files by Friday then the penalty is only for 3 months. Each month or part thereof is the period from the day after the due date to the date one month after the due date, not calendar months. So 10/16 - 11/15 is one month late. 11/16 - 12/15 is two months late. And so on. If you wait until e-file is open again in another week or two then he'll have one more month if filed after 1/15/2021.
 

#3
lucyko  
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Evaluate these potential strategies :
1) Since E-file is not currently open consider paper filing return tomorrow or Friday . This might save you 5 % of the penalty .Be sure to send registered mail or other options to prove you sent in by January 15th
2) Is your client eligible for the one time penalty abatement (clean record for last 3 years ). If so, you might want to just wait and file once E-file is open again . (I think it's anticipated to be the end of January ) On the other hand if the penalty is small you might want to pay it and save your one time penalty waiver for another day .
 

#4
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On the other hand if the penalty is small you might want to pay it and save your one time penalty waiver for another day


Doesn't work that way. If there is any penalty no matter how small in the 3 year lookback period then FTA doesn't work.

Option 3) Does the taxpayer qualify for COVID penalty relief?
 

#5
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Nightsnorkeler wrote:If he files by Friday then the penalty is only for 3 months. Each month or part thereof is the period from the day after the due date to the date one month after the due date, not calendar months. So 10/16 - 11/15 is one month late. 11/16 - 12/15 is two months late. And so on. If you wait until e-file is open again in another week or two then he'll have one more month if filed after 1/15/2021.


Thank you for your response. Can you give me a reference to the "30 days" vs calendar months? Seems like they could have otherwise worded it better, but where it says part of any month doesn't make any sense.
 

#6
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26 U.S. Code § 6651 - Failure to file tax return or to pay tax

(a)Addition to the tax
In case of failure—
(1)to file any return required under authority of subchapter A of chapter 61 (other than part III thereof), subchapter A of chapter 51 (relating to distilled spirits, wines, and beer), or of subchapter A of chapter 52 (relating to tobacco, cigars, cigarettes, and cigarette papers and tubes), or of subchapter A of chapter 53 (relating to machine guns and certain other firearms), on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate;
 

#7
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This means that the penalty is 5% whether it is one day late or 28-31 days late depending on the month. Assuming the due date is the 15th, then once the next 15th passes thee is another 5% regardless of whether it is one day past or by the 14th of the next month.

So, 5% per month or part thereof.
 

#8
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Everything you have posted makes sense. But it looks like Rev. Rul. 73-133, 1973-1 CB 605 poses an issue. As I read it, the post marked date is not the filing date for a delinquent return. Instead it is the the date the delinquent return is received by the IRS. Maybe overnight delivery is an option,
 


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