Molly Ellen, bookkeeper for Keystone Company, forgot to send in the payroll taxes due on April 15. She sent the payment November 8. The IRS sent her a penalty charge of 8% simple interest on the unpaid taxes of $4,100.
To calculate the penalty charge on the unpaid taxes, we can use the formula for simple interest: Interest = Principal × Rate × Time.
In this case,
Principal = $4,100 (unpaid taxes),
Rate = 8% (0.08 as a decimal), and
Time = the number of days between April 15 and November 8.
To determine the time, we need to know the number of days between the two dates.
First, let's calculate the number of days in each month.
April: 30 days
May: 31 days
June: 30 days
July: 31 days
August: 31 days
September: 30 days
October: 31 days
November: 8 days
Total days = 30 + 31 + 30 + 31 + 31 + 30 + 31 + 8 = 222 days.
Now, we can calculate the penalty charge:
Interest = $4,100 × 0.08 × (222 / 365)
Let's calculate the penalty charge using this formula.
Interest = $4,100 × 0.08 × (222 / 365)
= $4,100 × 0.08 × 0.60821917808
= $200.421917808
Therefore, the penalty charge on the unpaid taxes is approximately $200.42.