The penalty for a substantial understatement is triggered when

a. the taxpayer understates their tax by the larger if $5,000 or 10% of the correct tax,

b. the taxpayer shows negligence or disregard of the rules of regulations, causing an underpayment,

c. the taxpayer fails to pay the tax owed by the due date,

d. the taxpayer fails to file the return by the due date, including extentions, and there is a balance due.

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