Iowa Admin. Code r. 701-10.6 - [Effective until 3/26/2025] Penalties
(1)
Penalties applicable to all taxpayers. A penalty shall be
assessed upon tax due under the circumstances described in this subrule. The
rates for penalties described in this rule are uniform for all tax types.
Unless otherwise specified in this subrule, see rule
701-10.7 (421) for waivers that
may apply to these penalties.
a. For failure
to timely file a return, there is a 5 percent penalty on the unpaid tax. This
penalty, once imposed, will be assessed on all subsequent amounts found by the
taxpayer or the department to be due for the tax period. This penalty is in
addition to any other penalty provided by law.
b. For failure to timely pay the tax due on a
return, there is a 5 percent penalty on the unpaid tax. This penalty is in
addition to any other penalty provided by law.
c. For a deficiency of tax due found during
an audit or examination, there is a 5 percent penalty on the unpaid tax. This
penalty is in lieu of the penalty for failure to timely pay but is in addition
to any other penalty provided by law.
d. For willful failure to file a return with
the intent to evade tax or a filing requirement, or in the case of willfully
filing a false return with the intent to evade tax, there is a 75 percent
penalty. This penalty is in lieu of other penalties applicable under this rule.
This penalty is not subject to waiver.
e. For failure to remit at least 90 percent
of the tax due by the time an extension for further time to file a return is
made, there is a 10 percent penalty on the unpaid tax.
f. For failure to remit payment of taxes in
the form or manner required by the rules of the director, there is a 5 percent
penalty on the amount of the payment remitted in the incorrect form or manner,
not to exceed $500 per instance. This penalty shall be waived if the taxpayer
was not notified of the requirement to remit tax payments electronically or if
the incorrect electronic transmission of the payment was made before the
taxpayer was notified of the requirement to remit tax payments
electronically.
(2)
Penalties applicable to specified businesses for tax years beginning on
or after January 1, 2022, in which no tax is due.
a. Definitions. For purposes of this subrule,
the following definitions apply:
"Imputed Iowa liability" means the specified business's Iowa net income after the application of the Iowa business activity ratio, if applicable, multiplied by the applicable tax rate for the tax year, less any Iowa tax credits available to be claimed by the specified business in the current year. The applicable tax rate is:
1. In the case of an entity taxed as a C
corporation, the top corporation income tax rate under Iowa Code section
422.33,
2. In the case of a financial institution as
defined in Iowa Code section
422.61, the franchise tax rate
under Iowa Code section
422.63, or
3. In the case of an entity taxed as an S
corporation or partnership, the top individual income tax rate under Iowa Code
section 422.5A.
"Income return" includes an Iowa corporation income tax return (IA 1120), an Iowa franchise tax return (IA 1120F), an Iowa S corporation income tax return (IA 1120S), and an Iowa partnership income tax return (IA 1065).
"Specified business" means any of the following:
1. An entity taxed as a C
corporation that is required to file an Iowa corporation income tax return (IA
1120). This includes a consolidated group of corporations electing or required
to file an Iowa consolidated return under Iowa Code section
422.37.
2. An entity taxed as an S corporation that
is required to file an Iowa S corporation income tax return (IA
1120S).
3. A financial institution
that is required to file an Iowa franchise tax return (IA 1120F).
4. An entity taxed as a partnership that is
required to file an Iowa partnership income tax return (IA 1065).
b. For a failure by a specified
business to timely file an income return when no tax is due, a penalty shall be
assessed equal to the greater of $200 or 5 percent of the imputed Iowa
liability of the specified business, not to exceed $25,000. A specified
business that has Iowa tax due for a tax year (such as an S corporation subject
to Iowa income tax on built-in gains or passive investment income) is not
subject to this penalty for that tax year but may be subject to other penalties
provided in this rule.
c. For
willful failure by a specified business to file an income return with no tax
shown due with the intent to evade a filing requirement, or in the case of
willfully filing a false income return with no tax shown due with the intent to
evade reporting of Iowa-source income, a penalty shall be assessed equal to the
greater of $1,500 or 75 percent of the imputed Iowa liability of the specified
business. This penalty is not subject to waiver. A specified business that has
Iowa tax due for a tax year (such as an S corporation subject to Iowa income
tax on built-in gains or passive investment income) is not subject to this
penalty for that tax year but may be subject to other penalties provided in
this rule.
(3)
Examples. The following are examples to illustrate the
computation of penalties imposed under this rule. For purposes of these
examples, interest has been computed at the rate of 12 percent per year or 1
percent per month. The tax due amounts are assumed to be the total amounts due
when considering whether the failure to pay penalty should be assessed on the
basis that less than 90 percent of the tax due was paid.
Click here to view image
Click here to view image
Click here to view image
Click here to view image
Click here to view image
Click here to view image
Notes
ARC 5916C, IAB 9/22/21, effective 10/27/21
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
(1) Penalties applicable to all taxpayers. A penalty shall be assessed upon tax due under the circumstances described in this subrule. The rates for penalties described in this rule are uniform for all tax types. Unless otherwise specified in this subrule, see rule 701-10.7 (421) for waivers that may apply to these penalties.
a. For failure to timely file a return, there is a 5 percent penalty on the unpaid tax. This penalty, once imposed, will be assessed on all subsequent amounts found by the taxpayer or the department to be due for the tax period. This penalty is in addition to any other penalty provided by law.
b. For failure to timely pay the tax due on a return, there is a 5 percent penalty on the unpaid tax. This penalty is in addition to any other penalty provided by law.
c. For a deficiency of tax due found during an audit or examination, there is a 5 percent penalty on the unpaid tax. This penalty is in lieu of the penalty for failure to timely pay but is in addition to any other penalty provided by law.
d. For willful failure to file a return with the intent to evade tax or a filing requirement, or in the case of willfully filing a false return with the intent to evade tax, there is a 75 percent penalty. This penalty is in lieu of other penalties applicable under this rule. This penalty is not subject to waiver.
e. For failure to remit at least 90 percent of the tax due by the time an extension for further time to file a return is made, there is a 10 percent penalty on the unpaid tax.
f. For failure to remit payment of taxes in the form or manner required by the rules of the director , there is a 5 percent penalty on the amount of the payment remitted in the incorrect form or manner, not to exceed $500 per instance. This penalty shall be waived if the taxpayer was not notified of the requirement to remit tax payments electronically or if the incorrect electronic transmission of the payment was made before the taxpayer was notified of the requirement to remit tax payments electronically.
(2) Penalties applicable to specified businesses for tax years beginning on or after January 1, 2022, in which no tax is due.
a. Definitions. For purposes of this subrule, the following definitions apply:
"Imputed Iowa liability" means the specified business's Iowa net income after the application of the Iowa business activity ratio, if applicable, multiplied by the applicable tax rate for the tax year, less any Iowa tax credits available to be claimed by the specified business in the current year. The applicable tax rate is:
1. In the case of an entity taxed as a C corporation, the top corporation income tax rate under Iowa Code section 422.33,
2. In the case of a financial institution as defined in Iowa Code section 422.61, the franchise tax rate under Iowa Code section 422.63, or
3. In the case of an entity taxed as an S corporation or partnership, the top individual income tax rate under Iowa Code section 422.5A.
"Income return" includes an Iowa corporation income tax return (IA 1120), an Iowa franchise tax return (IA 1120F), an Iowa S corporation income tax return (IA 1120S), and an Iowa partnership income tax return (IA 1065).
"Specified business" means any of the following:
1. An entity taxed as a C corporation that is required to file an Iowa corporation income tax return (IA 1120). This includes a consolidated group of corporations electing or required to file an Iowa consolidated return under Iowa Code section 422.37.
2. An entity taxed as an S corporation that is required to file an Iowa S corporation income tax return (IA 1120S).
3. A financial institution that is required to file an Iowa franchise tax return (IA 1120F).
4. An entity taxed as a partnership that is required to file an Iowa partnership income tax return (IA 1065).
b. For a failure by a specified business to timely file an income return when no tax is due, a penalty shall be assessed equal to the greater of $200 or 5 percent of the imputed Iowa liability of the specified business, not to exceed $25,000. A specified business that has Iowa tax due for a tax year (such as an S corporation subject to Iowa income tax on built-in gains or passive investment income) is not subject to this penalty for that tax year but may be subject to other penalties provided in this rule.
c. For willful failure by a specified business to file an income return with no tax shown due with the intent to evade a filing requirement, or in the case of willfully filing a false income return with no tax shown due with the intent to evade reporting of Iowa-source income, a penalty shall be assessed equal to the greater of $1,500 or 75 percent of the imputed Iowa liability of the specified business. This penalty is not subject to waiver. A specified business that has Iowa tax due for a tax year (such as an S corporation subject to Iowa income tax on built-in gains or passive investment income) is not subject to this penalty for that tax year but may be subject to other penalties provided in this rule.
(3) Examples. The following are examples to illustrate the computation of penalties imposed under this rule. For purposes of these examples, interest has been computed at the rate of 12 percent per year or 1 percent per month. The tax due amounts are assumed to be the total amounts due when considering whether the failure to pay penalty should be assessed on the basis that less than 90 percent of the tax due was paid.
Click here to view image
Click here to view image
Click here to view image
Click here to view image
Click here to view image
Click here to view image
Notes
ARC 5916C, IAB 9/22/21, effective 10/27/21