Penalty Exception Provisions
Our Department may assess penalty on the following tax types:
- Cigarette tax
- Tobacco tax
- Fuel tax
- Individual income tax
- Withholding tax
- Corporation income tax
- Franchise tax
- Sales tax
- Consumer’s use tax
- Retailer’s use tax
- Inheritance tax
- Generation skipping transfer tax
- Fiduciary tax
- Environmental protection charge (NOTE: The EPC was repealed as of 12/31/2016. The Department may impose a penalty for EPC incurred on or before 12/31/2016).
The penalty — except penalty for willfully failing to file or willfully filing a false return or deposit — cannot be imposed if the circumstances described in this brochure occur. Some of these exceptions may require proof to support your position that penalty should not be imposed.
Four Types of Penalty
Four types of penalty may be applied to taxes due. In situations where more than one type of penalty applies, the highest percentage penalty is the only one charged.
- Failure to timely file a return or deposit: 10%
- Failure to timely pay the tax due on the return or deposit form: 5%
- Audit deficiencies when the Department determines additional tax is due: 5%
- Willful failure to file a return or deposit with intent to evade tax: 75% (There are no exceptions to this penalty.)
Penalty may not be imposed in the following circumstances. The number(s) following each reason indicates which of the three penalties will not be imposed.
- Taxpayer timely pays at least 90% of the correct tax due: 1,2,3
- Taxpayer files a late return or deposit form but has 36 immediately prior months of timely filing history (semi-monthly, monthly and quarterly filers only): 1 [This does not apply to income tax filers.]
- Taxpayer, immediate family member or responsible party dies: 1
- Taxpayer, immediate family member or responsible party is seriously ill or hospitalized: 1
- Taxpayer’s records are destroyed by fire, flood or other act of nature: 1
- Taxpayer proves he or she relied on written advice from the Department, Department of Transportation, county treasurer or IRS: 1, 2, 3
- Taxpayer shows he/she relied on results of a previous audit: 1, 2, 3
- Taxpayer provides documented proof of substantial authority to support his/her particular position and that all facts and circumstances were disclosed on the return or deposit: 1, 2, 3
- Taxpayer provides proof that the return, deposit, or payment was mailed on time and with proper postage but that it was incorrectly mailed to the IRS or other state or local governmental agency: 1, 2
- Taxpayer proves before being contacted by the Department that the wrong permit holder paid the tax timely: 1, 2
- Taxpayer discovers through the Department’s self-audit program* that he/she failed to file: 1
- Taxpayer voluntarily files an amended return and pays all tax due before being contacted by the Department except under a Department self-audit program: 2
- Taxpayer voluntarily provides written proof of a federal audit and files a return with payment within 60 days of completion of the federal audit: 2
* A taxpayer involved with a self-audit program will receive forms from the Department that will identify the audit as a self-audit program. The specific years will be identified. Any returns voluntarily filed that are not part of the self-audit program do not qualify for a waiver of penalty for this exception.
To request a waiver of penalty for Sales, Retailers Use, Consumer’s Use, Withholding, Cigarette/Tobacco, & Motor Fuel, you may use the Penalty Waiver Request form.
Inheritance Tax Exceptions
Effective for estates with disclaimers filed on or after July 1, 2007, the 10 percent late-filing penalty or the 5 percent failure-to-pay penalty can be waived if the sole reason is a beneficiary’s decision to disclaim property or disclaim an interest in property from the estate.
However, for either penalty to be waived the Iowa inheritance tax return must be filed and all tax must be paid within the later of nine months from the date of death or 60 days from the delivery or filing date of the disclaimer.