Penalties

Question 1

What is the penalty applied to shortfall amount that was NOT distributed per RMD?

Answer 1

25% Penalty

Question 2

Prior to age 65, What’s the tax and tax penality for withdrawals from HSA for non-qualified medical expenses?

Answer 2

Non-qualified medical expenses are subject to regular income tax and a 20% penalty tax.

Question 3

What is the penalty for early withdrawals from annuity?

Answer 3

Subject to early withdrawal 10% penalty prior to age 59 ½

Withdrawals have LIFO tax treatment (i.e. earnings first)

Question 4

What is the surrender penalty for Annuities?

Answer 4

Surrender penalty applies typically over a 7-to-10-year period (or longer)

Question 5

What’s the penality for early withdrwals from MEC Policy?

Answer 5

• 10% penalty for early withdrawals
• Living distributions are taxed as ordinary income

Question 6

What’s the penality for early withdrwals from non-MEC Policy?

Answer 6

• No penalty for distributions
• Distributions are considered ordinary income and taxed as such

Question 7

What is the tax penalty for Negligence?

Answer 7

• “accuracy related” error in underpayment of tax liability with no intent to defraud IRS
• A 20% penalty will apply to the amount of the deficiency.

Question 8

What is the tax penalty for Tax Fraud?

Answer 8

defraud, a 75% penalty will apply to the amount of the deficiency.

Question 9

What is Frivolous Return and what’s the penality for it?

Answer 9

• substantially incorrect tax return intentionally
• Penalty is $5,000

Question 10

What is the tax penalty for Failure to File?

Answer 10

• 5% of the unpaid taxes for each month or part of a month that a tax return is late up to a maximum of 25%.
• A minimum penalty of $510 is imposed if the tax return is later than 60 days.

Question 11

What is the tax penalty for Failure to Pay?

Answer 11

0.5% per month the tax is unpaid up to a maximum of 25%.

Question 12

Understatement of Liability

Answer 12

If the tax withheld from W-2 and/or estimated payments is less than:
* 90% of the current year liability, or
* 100% of the prior year liability or
* 110% of the prior year liability if AGI was over $150,000-MFJ

Penalty based on:
* The amount of the underpayment,
* The period when the underpayment was due and underpaid, and
* The interest rate for underpayments that we publish quarterly.

Question 13

What are applicable penalties to Tax Preparer?

Answer 13

• $60 per each failure of a tax preparer

Failure to
* furnish a copy to the taxpayer
* sign return
* furnish identifying number
* retain copy or list
* file correct information returns
* Be diligent in determining eligibility for certain tax benefits