Solutions to Problems 1-45, 1-47, 2-67 &2-68
As for problem 1-45, Paul did not meet his entire obligation to the IRS in 2011. Hi had a tax liability of $32,817 and he was withheld $27,198 therefore owing the IRS $5,619. But Paul did not pay the $5,619 with his tax return and rather opted to pay 8 month later without asking for an extension. Therefore Paul faces a penalty and possible interest charges for the unpaid tax liability of $5,619. The penalty could be 0.5% per month (or fraction thereof) up to a maximum of 25% for failure to pay the taxes that where due. If Paul penalty would have been 0.5% the amount owed would be $7,866.60 {$5,619 + $2247.60 (5,619*0.05*8)} or could be up to a maximum of $16,857 {$5,619 + $11,238 (5,619*0.25*8)}. Also the IRS could impose an interest charge per day of 3%, as of the last interest table (interest change every 3 month).
As for problem 1-47 the IRS can audit Dan tax return but they have to meet certain criteria. The IRS has a 3 year statute of limitation but there are 3 exceptions to that limitation: * The IRS has six years from the date a return is filed to audit a tax return and to assess additional tax if the taxpayer omits income that amounts to more than 25% of income that was reported on the tax return. * The IRS also has six years to audit a tax return and assess additional tax on income related to undisclosed foreign financial assets if the omitted income is more than $5,000. * The statute of limitations on audits and assessing additional tax remains open indefinitely if the taxpayer files a false or fraudulent tax return.
Therefore the IRS can audit Dan 2010 tax return because it falls within the 3 year limitation. The IRS can also audit Dan 2008 because he failed to report $40,00 of income and that is more than 25% of his income in 2008( income of $60000*.25= $15,000) as for the 2003 tax return