The IRS Determined That Ernie Bledsoe Underpaid His 2018 Income

The IRS determined that Ernie Bledsoe underpaid his 2018 income tax by $11,200. Ernie's Form 1040 for that year reported an income tax liability of $31,800, so his correct 2018 income tax was $43,000 ($11,200 deficiency + $31,800 reported tax) . Compute Ernie's penalty for a substantial understatement of income tax.

A) $0
B) $1,240
C) $1,380
D) $2,240

Correct Answer:

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