Student Question from: Rachael G
Course:  Income Tax

Student Question:

I had a couple questions in regards to tax filing penalties.  1) Since the penalty is calculated from net tax due, what happens when a taxpayer overpaid taxes and gets a refund? How is the penalty calculated? 2) Is the minimum penalty after 60 days on top of the 5% monthly penalty for failure to file or is that included in it?  Thanks!

Instructor Response:

Great question, Rachael!  First of all, hopefully our clients don’t ever have too big of a refund since that is money they could have “put to work” during the year.  But that’s a separate discussion.  But if you are due a refund, there will be no penalty assessed for filing a late return because of what you said, the penalty is based on what you owe.  IRS cares only that they get their money and get it on time.  If you paid what’s due, or more, you won’t be penalized for a late return.

And then in regards to the minimum penalty, it is definitely not an additional penalty.  I hesitate to say that it is “included” because it’s simply a floor you now owe due to the lateness (60 days).  But it is not an additional penalty.