Mich. Admin. Code R. 205.1013 - Failure to file or pay penalty; waiver of penalty; reasonable cause for failure to file or pay

Rule 13.

(1) Except as otherwise provided in the act, if a taxpayer fails or refuses to file a return, or fails or refuses to pay a tax administered under the act within the time specified by law, a penalty of $10.00 or 5% of the tax, whichever is greater, shall be added to the tax owed if the failure is for a period of not more than 1 calendar month. An additional penalty shall be added to the tax owed at the rate of 5% for each additional month or fraction of a month during which the failure continues or the tax is not paid. The maximum penalty shall be 50% of the tax owed.

(2) If a return is filed or a remittance is paid after the time specified, the taxpayer may request that the commissioner of revenue waive and the commissioner shall waive the penalty authorized by section 24(4) of the act if the taxpayer establishes that the failure to file the return or to pay the tax was due to reasonable cause and not to willful neglect.

(3) A waiver of penalty request shall be in writing and shall state the reasons alleged to constitute reasonable cause and the absence of willful neglect.

(4) The taxpayer bears the burden of affirmatively establishing, by clear and convincing evidence, that the failure to file or failure to pay was due to reasonable cause.

(5) A taxpayer is required to exercise ordinary business care and prudence in complying with filing and payment requirements.

(6) When determining whether a taxpayer was unable to file a return or pay a tax in spite of the exercise of ordinary business care and prudence, the timeliness, facts and circumstances of each case will be considered.

(7) The examples set forth in this subrule, if clearly established and if other contributing circumstances do not exist, generally constitute reasonable cause for failure to file or pay. The following examples are not intended to be the only instances in which reasonable cause may be established and each case shall be judged individually upon its own facts and circumstances:

(a) The delay in filing or payment is caused by the prolonged unavoidable absence of the taxpayer responsible for filing and the taxpayer who is precluded, due to circumstances beyond the taxpayer's control, from making alternate arrangements for filing and paying.

(b) The delay in filing or payment is caused by the destruction, by fire or other casualty, of the taxpayer's records or the taxpayer's business if the destroyed records directly related to and prevented timely compliance.

(c) The delay arose from the taxpayer's inability to obtain the necessary records or information due to reasons beyond the taxpayer's control. The taxpayer shall explain why the records are needed to comply, why the records are unavailable, other avenues explored to secure the information, and why the information is not estimated.

(d) The taxpayer receives erroneous written information from a department employee who responds to the taxpayer's request and the taxpayer provided all complete and relevant information. The erroneous written information directly relates to and prevents the taxpayer from complying with state tax obligations.

(e) The filing of a return or payment of tax is delayed in delivery by the United States post office or is filed or paid in the wrong office of the department.

(f) A bank error that is the sole cause of the failure to pay.

(8) The following factors alone do not constitute reasonable cause for failure to file or pay. However, these factors may be considered with other facts and circumstances and may constitute reasonable cause. The following factors are for illustration only and are not an exclusive listing of factors:

(a) The compliance history of the taxpayer.

(b) The nature of the tax.

(c) The taxpayer's financial circumstances, including the amount and nature of the taxpayer's expenditures in light of the income the taxpayer, at the time of the expenditures, could reasonably expect to receive before the due date prescribed for paying the tax.

(d) The taxpayer was incorrectly advised by a tax advisor who is competent in Michigan state tax matters after furnishing the advisor with all necessary and relevant information and the taxpayer acted reasonably in not securing further advice.

(e) The taxpayer's accounting and financial system that is designed to ensure timely filing breaks down due to unavoidable circumstances and, upon discovery, the taxpayer promptly complies.

(f) The death or serious incapacitating illness of the taxpayer or the person responsible for filing the return or making the payment or a member of his or her immediate family.

(g) Lack of funds to make timely payment.

(h) A taxpayer's reliance on an employee or agent to file the return or make the payment.

Notes

Mich. Admin. Code R. 205.1013

1996 AACS