Intuit Academy Tax Practice Exam

For Alexa's taxable income, what would happen if she did not calculate her underpayment penalty?

1. It will not be assessed

2. She could face additional fines

3. The IRS will calculate it for her

4. She can request a waiver

The correct answer is: The IRS will calculate it for her

If Alexa did not calculate her underpayment penalty, the IRS has the authority to calculate it for her. This means that the IRS will review her tax situation and determine whether an underpayment penalty applies based on her tax filings and payments made throughout the year. The IRS uses specific criteria and formulas to ascertain whether the taxpayer has sufficient payments and if there is an outstanding balance that could incur a penalty. This outcome emphasizes the IRS's role in ensuring compliance with tax laws, highlighting that taxpayers cannot merely avoid penalties by neglecting their calculations. It is important for taxpayers to understand that, while they can calculate their underpayment penalties themselves, if they do not, the IRS will step in to enforce regulations and may impose penalties they determine to be applicable. The other options, while potentially relevant in different contexts, do not accurately describe the IRS's process. The IRS does not simply refrain from assessing a penalty because it wasn't calculated, nor does it automatically impose additional fines beyond the established penalty framework. Requesting a waiver of the penalty is possible but typically requires valid grounds, which does not apply in the scenario where there is a straight failure to calculate the underpayment.