Penalties - Sales, Use, Withholding, Fuel, and Income Taxes

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% of the unpaid tax.

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

If you paid less than 90% of the correct tax due by the due date, you owe an additional 5% of the unpaid tax.

You may be subject to both penalties. 

5% Penalty for audit or examination deficiency:

A penalty of 5% will be added to the unpaid tax if the Department discovers an underpayment during an audit or examination.

75% Penalty for fraud or frivolous tax return filings or willful failure to file a return:

A penalty of 75% will be added to the fraudulent claim or unpaid tax for fraudulent claims or willful failure to file a return.

Waivers:

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.

Rent Reimbursement

If you knowingly make a false claim and the claim was paid to you, you will be billed back for any payment you received. You may also be subject to a 75% penalty for making a false or frivolous claim.

Fuel Tax Only

In addition to the penalties described above, the following two penalties also apply to fuel tax:

  • Failure to pay electronically: A penalty of 5% will be added to the tax due if the payment is not received electronically through ePay or ACH Credit as required.
  • Failure to use the required method of filing: The tax return information must be reported through the eFile & Pay system. If not, a penalty of 5% of the amount of tax due will be added.

Penalty Exception Provisions

Penalties can be waived only under special circumstances. See Penalty Waiver Request (78-628).

 

This summary is based on Iowa Code section 421.27, as amended by 2021 Iowa Acts, Senate File 608, and Iowa Admin. Rule 701-10.