The IRS determined that John underpaid his 2016 tax liability by $6,000 due to negligence. In 2018, John pays $1,000 of interest related to the underpayment and the full amount of any penalties assessed by the IRS.   a. Calculate the amount of the accuracy-related penalty that could be assessed by the IRS in this situation.       b. What part of the deficiency, income taxes, interest, and penalty, is deductible by John on his current tax return? Explain.

SWFT Comprehensive Volume 2019
42nd Edition
ISBN:9780357233306
Author:Maloney
Publisher:Maloney
Chapter26: Tax Practice And Ethics
Section: Chapter Questions
Problem 18CE
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The IRS determined that John underpaid his 2016 tax liability by $6,000 due to negligence. In 2018, John pays $1,000 of interest related to the underpayment and the full amount of any penalties assessed by the IRS.

 

a.

Calculate the amount of the accuracy-related penalty that could be assessed by the IRS in this situation.

 

 

 

b.

What part of the deficiency, income taxes, interest, and penalty, is deductible by John on his current tax return? Explain.

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