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Penalty and Interest

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Line: 
74
Step: 
Step 11
Step Subject: 
Refund or Amount Due
Year: 
2014

74. PENALTY AND INTEREST.

Enter the penalty on line 74a, the interest on line 74b and the total on line 74.

74a. Penalty

10% Penalty for Failure to Timely File a Return:

If you do not file your return by the due date and at least 90% of the correct tax is not paid, you owe an additional 10% of the unpaid tax.

5% Penalty for Failure to Timely Pay the Tax Due:

If you file your return on time but do not pay at least 90% of the correct tax due, you owe an additional 5% of the unpaid tax.

You will never be subject to both the 5% and 10% penalties. The penalty will be the applicable 5% or 10%, but not a total of 15%.

If 90% of the correct tax due is paid by the due date, no penalty is due. To determine if 90% was paid, multiply line 54 of the IA 1040 by 90%. If the result is equal to or less than the amount on line 68 of the IA 1040, plus any payment made with a return filed by the due date, 90% of the tax has been paid timely and no penalty is due.

74b. Interest

Interest must be added to delinquent tax. Interest is added at a rate of 0.4% per month beginning on the due date of the return (April 30) and accrues each month until paid in full. Part of a month constitutes a whole month, so if you pay the tax on June 3, you are late for May and June for a total interest rate of 0.8% (2 x 0.4%).

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