What might you check to distinguish between unprompted and prompted penalties?

To distinguish between unprompted and prompted penalties, checking the reason for the late submission is crucial. An unprompted penalty typically arises when the taxpayer voluntarily discloses their noncompliance or late submission to the tax authorities before any official inquiry or audit takes place. This proactive behavior can lead to a lower penalty or more lenient treatment.

On the other hand, a prompted penalty occurs when the tax authorities have initiated an audit or inquiry, and the taxpayer subsequently fails to comply or rectify the situation in a timely manner. Understanding the reason behind the late submission helps identify whether it was a proactive admission of a mistake (leading to an unprompted penalty) or a response to a challenge from the tax authorities (leading to a prompted penalty).

While the timing of filing, the taxpayer’s prior history, and the amount of taxes owed can all influence the overall situation and penalties imposed, it is primarily the reason for the late submission that directly addresses the classification of the penalty as prompted or unprompted.