Tax Compliance and Reporting
Tax Compliance and Reporting
This domain tests filing obligations, deadlines, information returns, penalties, and cross-border disclosure - the administrative side of tax practice.
Core rules
- Individual returns due April 15; partnership/S corp March 15; C corp April 15 (calendar year). Extension to file is not an extension to pay. Estimated tax: quarterly; safe harbor 90% of current tax or 100% of prior year (110% if prior AGI > $150,000; $75,000 MFS).
- Information returns: W-2, 1099-NEC ($600), 1099-K (payment card/third-party network; thresholds change), 1098, 1099-R; penalties for late/incomplete returns; due dates and e-file requirements.
- Schedules K-1; Schedules K-2/K-3 for international; Form 5472 for foreign-owned U.S. corps; FBAR FinCEN 114 (foreign accounts >$10,000 aggregate; due April 15 with automatic October extension); Form 8938 under FATCA.
- Penalties: failure to file (5%/month, max 25%), failure to pay (0.5%/month), accuracy §6662 (20%), fraud §6663 (75%), information return penalties; reasonable cause defense.
- Statutes: assessment generally three years; six years for >25% omission; unlimited for fraud/no return.
Worked example
Individual's prior-year tax was $20,000 and prior-year AGI was $160,000. Current-year tax is $28,000; she paid $18,000 through withholding. Safe harbor is 110% of $20,000 = $22,000 because AGI exceeds $150,000. She is underpaid by $4,000 for estimated tax purposes, even though withholding is 64% of current tax. The 90% current-year safe harbor would require $25,200. The underpayment penalty is computed on the shortfall by quarter, not on the total tax.
Traps
Treating an extension as a payment extension; missing the 110% safe harbor; using the 1099-NEC $600 rule for 1099-K; forgetting FBAR's separate due date and $10,000 aggregate threshold; filing K-2/K-3 late; assuming the three-year statute applies to fraud; ignoring state e-file mandates.