I think my Mom & Dad might have been assessed the wrong IRS penalty. I'm not sure what they should do next. Here are the details . . .
My elderly father made a mistake on his 2021 federal tax return while using TurboTax & significantly under represented the taxable amount of his federal pension. I realized this in 2024 & helped him file an amended return to correctly report the additional income. He paid the additional amount of tax owed when we sent in the amended return. We did not attempt to calculate the interest or penalties.
The IRS finally sent a letter last week stating how much he & my mom owe in penalties & interest. The letter states the penalty is a "failure-to-file penalty," which I do not understand as he did file his original return on time, albeit with a large error related to his pension income.
I understand there is also a penalty for "substantial underpayment of income tax", which I believe would apply to him because he had to pay an additional ~$23K in tax due to his error.
Bottom line, I'm confused & wondering if they should call the IRS about this, or just leave well enough alone. The "substantial underpayment of income tax" penalty would be even more than the "failure-to-file penalty" if I'm understanding it correctly.
Any thoughts on this? If a person filed their return in a timely manner, should they be assessed the "failure-to-file penalty"? Thanks for your insights!
