Compute the Failure to Pay and Failure to File Penalties

question 164

Essay

Compute the failure to pay and failure to file penalties for John,who filed his 2016 income tax return on December 14,2017,paying the $10,000 amount due.On April 1,2017,John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request.He has no reasonable cause for failing to file his return by October 15,or for failing to pay the tax that was due on April 15,2017.John's failure to comply with the tax laws was not fraudulent.

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Definitions:

Opportunity Cost

The cost of what is forgone in order to pursue a certain action; the value of the best alternative option that is not selected.

Subjective Values

The notion that the value of goods and services is determined by the preferences and perceptions of individuals, rather than by intrinsic characteristics.

Decision Making

The process of selecting among available alternatives based on the preferences and values of the decision-maker.

Sunk Cost

A cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions.