Under certain circumstances, the penalty for failure to
timely file a return, failure to timely pay the tax due with the filing of a
return, or failure to pay following an audit by the department is waived. The
taxpayer has the burden to prove the necessary conditions to waive a
penalty.
(1) Definitions. For purposes
of this rule, the following definitions apply:
"Act of God" means an unusual and
extraordinary manifestation of nature which could not reasonably be anticipated
or foreseen and cannot be prevented by human care, skill, or foresight.
"Immediate family" includes the spouse,
children, or parents of the taxpayer. There is a rebuttable presumption that
relatives of the taxpayer beyond the relation of spouse, children, or parents
of the taxpayer are not within the taxpayer's immediate family for purposes of
the waiver exceptions.
"Sanctioned self-audit program" means an
audit performed by the taxpayer with forms provided by the department as a
result of contact by the department to the taxpayer prior to voluntary filing
or payment of the tax. Filing voluntarily without contact by the department
does not constitute a sanctioned self-audit.
"Substantial authority" means the weight of
authorities for the tax treatment of an item is substantial in relation to the
weight of authorities supporting contrary positions.
In determining whether there is substantial authority, only
the following will be considered authority: applicable provisions of Iowa
statutes; the Internal Revenue Code; Iowa administrative rules construing those
statutes; court cases; administrative rulings; legal periodicals; department
newsletters and tax return instruction booklets; tax treaties and regulations;
and legislative intent as reflected in committee reports.
Conclusions reached in treaties, legal opinions rendered by
other tax professionals, descriptions of statutes prepared by legislative
staff, legal counsel memoranda, and proposed rules and regulations are not
authority.
There is substantial authority for the tax treatment of an
item if there is substantial authority at the time the return containing the
item is due to be filed or there was substantial authority on the last day of
the taxable year to which the return relates.
The taxpayer must notify the department at the time the
return or payment is originally due of the substantial authority the taxpayer
is relying upon for not filing the return or paying the tax due.
(2) Documentation. Unless
otherwise indicated, written documentation is required to support the waiver of
a penalty.
(3) For failure to
timely file a return or failure to timely pay tax due, the 5 percent penalties
shall be waived upon a showing of the following exceptions.
a. An amount of tax greater than $0 is due
and at least 90 percent of the tax required to be shown due has been paid by
the due date of the tax return. This exception does not apply to the penalty
for failure to timely file by a specified business under subrule
10.6(2).
b. A taxpayer required to
file a monthly or quarterly return is allowed one late return or one late
payment within a three-year period.
(1) The
use by the taxpayer of any other penalty exception under this subrule will not
count as a late return or payment for purposes of this subrule.
(2) If the taxpayer receives this waiver, the
taxpayer must make timely filings and payments for three years prior to being
eligible for another waiver under this paragraph.
(3) This exception does not apply to an
income return, a franchise return, or a moneys and credits return.
(4) This exception will automatically be
applied to a return or payment by the department if the taxpayer is eligible
for the exception.
(5) This
exception is determined on the basis of the tax period for which the return or
payment is due and not the date on which the return is filed or payment is
made.
EXAMPLE: Taxpayer A, a retail business with multiple
employees, has not been late in filing returns or making payments for five
years. Taxpayer A files its withholding return for the fourth quarter of 2020,
due January 20, 2021, on the due date but does not make the payment until the
next day. Taxpayer A incurs the penalty for failing to timely pay, but the
penalty will be waived under this exception. Taxpayer A is not eligible for a
waiver for a late return filing or late payment again until the due date for
the fourth quarter of 2023.
c. Death of a taxpayer, a member of the
immediate family of the taxpayer, or the person directly responsible for filing
the return and paying the tax, when the death interferes with timely filing of
a return or timely payment of tax. The taxpayer will be provided an extension
of 30 days from the date the return or payment is originally due without
incurring penalty. There is a rebuttable presumption that a death that occurs
more than 30 days before the original date the return or payment is due does
not interfere with timely filing or payment. The taxpayer, or taxpayer's legal
representative, has the burden of supplying proof of when the death
occurred.
d. The onset of serious,
long-term illness or hospitalization of the taxpayer, a member of the
taxpayer's immediate family, or the person directly responsible for filing the
return and paying the tax when such illness or hospitalization interferes with
the timely filing of a return or timely payment of tax.
(1) There is a rebuttable presumption that
the onset of an illness or hospitalization that precedes the due date of the
return or payment form by more than 30 days does not interfere with the timely
filing or timely payment of tax.
(2) The taxpayer will be provided an
extension of at least 30 days from the date the return or payment form is
originally due or until the illness or hospitalization no longer reasonably
interferes with the taxpayer's ability to file the return without incurring
penalty.
(3) The taxpayer has the
burden of proof on whether or not a serious, long-term illness or
hospitalization has occurred, when it occurred, and how the illness or
hospitalization interfered with the taxpayer's ability to timely file a return
or timely pay.
e.
Destruction of records by fire, flood, or act of God when the destruction
interferes with the timely filing of a return or timely payment of tax. There
is a rebuttable presumption that an "act of God" that precedes the due date of
the return or payment by 30 days or more did not interfere with the timely
filing or payment.
f. The taxpayer
presents proof that the taxpayer at the due date of the return or payment
relied upon applicable, documented, written advice made specifically to the
taxpayer, to the taxpayer's preparer, or to an association representative of
the taxpayer from the department, state department of transportation, county
treasurer, or Internal Revenue Service. The advice should be relevant to the
agency offering the advice and not beyond the scope of the agency's area of
expertise and knowledge. The reliance must be the direct cause of the failure
to file or failure to pay, and the advice must be current and not superseded by
a court decision, ruling of a quasi-judicial body such as an administrative law
judge or the director, or by the adoption, amendment, or repeal of a rule or
law.
g. Reliance upon the results
of a previous audit was a direct cause for failure to file or pay where the
previous audit expressly and clearly addressed the issue and the previous audit
results have not been superseded by a court decision or by adoption, amendment,
or repeal of a rule or law.
h. The
taxpayer presents documented proof of substantial authority to rely upon a
particular position or upon proof that all facts and circumstances are
disclosed on a return. Mathematical, computation, or transposition errors are
not considered as facts and circumstances disclosed on a return. These types of
errors will not be considered as penalty exceptions.
i. The return or payment is timely, but
erroneously, mailed with adequate postage to the Internal Revenue Service,
another state agency, or a local government agency and the taxpayer provides
proof of timely mailing with adequate postage. The taxpayer must provide
competent evidence of the mailing as stated in Iowa Code section
622.105.
j. The tax has been paid by the wrong
licensee and the payments were timely remitted to the department for one or
more tax periods prior to notification by the department.
k. The failure to file was discovered through
a sanctioned self-audit program conducted by the department.
l. The availability of funds in payment of
tax required to be made through electronic funds transfer is delayed and the
delay of availability is due to reasons beyond the control of the taxpayer.
m. For estates with disclaimers, a
penalty will not be imposed for failure to pay or a late-filed Iowa inheritance
tax return if the sole reason for the failure to pay or late-filed inheritance
tax return is due to a beneficiary's decision to disclaim property or disclaim
an interest in property from the estate. However, for the penalty to be waived,
the Iowa inheritance tax return must be filed and all tax must be paid to the
department within the later of nine months from the date of death or 60 days
from the delivery or filing date of the disclaimer pursuant to Iowa Code
section 633E.12.
(4) In addition to any applicable waivers for
failure to timely pay the tax due on a return in subrule 10.7(3), the 5 percent
penalty for failure to timely pay the tax due shall be waived upon a showing of
any of the following exceptions:
a. The
taxpayer voluntarily files an amended return and pays all tax shown to be due
on the return prior to any contact by the department, except under a sanctioned
self-audit program conducted by the department.
b. The taxpayer provides written notification
to the department of a federal audit while it is in progress and voluntarily
files an amended return which includes a copy of the federal document showing
the final disposition or final federal adjustments within 60 days of the final
disposition of the federal government's audit.
(5) For a deficiency of tax due on a return
found during an audit or examination, the 5 percent penalty is waived under the
following exceptions:
a. At least 90 percent
of the tax due has been paid by the due date.
b. The taxpayer presents proof that the
taxpayer relied upon applicable, documented, written advice specifically made
to the taxpayer, to the taxpayer's preparer, or to an association
representative of the taxpayer from the department, state department of
transportation, county treasurer, or federal Internal Revenue Service,
whichever is appropriate, that the reliance was the direct cause for the
failure to pay and the advice has not been superseded by a court decision,
ruling by a quasi-judicial body, or the adoption, amendment, or repeal of a
rule or law.
c. Reliance upon
results in a previous audit was a direct cause for the failure to pay the tax
due where the previous audit expressly and clearly addressed the issue and the
previous audit results have not been superseded by a court decision or the
adoption, amendment, or repeal of a rule or law.
d. The taxpayer presents documented proof of
substantial authority to rely upon a particular position or upon proof that all
facts and circumstances are disclosed on a return. Mathematical, computation,
or transposition errors are not considered as facts and circumstances disclosed
on a return. These types of errors will not be considered as penalty
exceptions.
