Enter the penalty on line 72a, the interest on line 72b, and the total on line 72.
5% Penalty for Failure to Timely File a Return:
If you do not file your return by the due date and you paid less than 90% of the correct tax, you owe an additional 5% (10% for returns due before July 1, 2021) of the unpaid tax.
5% Penalty for Failure to Timely Pay the Tax Due:
If you file your return on time but paid less than 90% of the correct tax due, you owe an additional 5% of the unpaid tax.
For returns due before July 1, 2021, you will never be subject to both the 5% failure to timely pay and 10% failure to timely file penalties. The penalty will be the applicable 5% or 10%, but not a total of 15%. For returns due on or after July 1, 2021, you may be subject to both the 5% failure to timely file penalty and the 5% failure to timely pay penalty.
If 90% of the correct tax due is paid by the due date, then no penalty is due. To determine if 90% was paid, multiply line 56 of the IA 1040 by 90%. If the result is equal to or less than the amount on line 66 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.
5% Penalty for audit or examination deficiency:
If the Department discovers an underpayment during an audit or examination, a penalty of 5% will be added to the unpaid tax.
75% Penalty for fraud or frivolous income tax return filings:
A person who willfully intends to make a false or frivolous tax return to claim a refund, or to evade tax is guilty of fraud. A penalty of 75% of the refund claimed will be due.
Penalties can be waived under limited circumstances, as described in Iowa Code section 421.27. Complete and submit a Penalty Waiver Request form (78-629) to request a penalty be waived.
$500 Civil Fraud Penalty:
A $500 Civil Penalty is assessed when a return is considered to be a “frivolous return.” This would include a return which is filed with false information which is used to reduce the amount of tax due, or increase the refund received. A return may also be assessed this penalty when a position of law is taken which is frivolous or is intended to delay or impede the administration of the tax laws of this state.
Interest must be added to delinquent tax. Interest is added at a rate of 0.5% per month beginning on the due date of the return (June 1) and accrues each month until paid in full. Part of a month constitutes a whole month, so if you pay the tax on July 3, you are late for June and July for a total interest rate of 1% (2 x 0.5%).