A $500 civil penalty is imposed on any return of a taxpayer
that is considered to be a frivolous return. A frivolous return is a return
that lacks sufficient information from which the substantial correctness of the
amount of tax liability can be determined or contains information that on its
face indicates that the amount of tax shown is substantially incorrect and that
reflects a position of law that is frivolous or is intended to delay or impede
the administration of the tax laws of this state.
If the frivolous return penalty is applicable, the penalty
will be imposed in addition to any other penalty that has been assessed. If the
frivolous return penalty is relevant, the penalty may be imposed even under
circumstances when it is determined that there is no tax liability on the
return.
(1)
Nonexclusive
examples of circumstances under which the frivolous return penalty may be
imposed. The following are examples of returns filed in circumstances
under which the frivolous return penalty may be imposed:
a. A return claiming a deduction against
income or a credit against tax liability that is clearly not allowed such as a
"war," "religious," or "conscientious objector" deduction or tax
credit.
b. A blank or partially
completed return that was prepared on the theory that filing a complete return
and providing required financial data would violate the
Fifth Amendment
privilege against self-incrimination or other rights guaranteed by the
Constitution.
c. An unsigned return
where the taxpayer refused to sign because the signature requirement was
"incomprehensible or unconstitutional" or the taxpayer was not liable for state
tax since the taxpayer had not signed the return.
d. A return that contained personal and
financial information on the proper lines but where the words "true, correct
and complete" were crossed out above the taxpayer's signature or where the
taxpayer claimed the taxpayer's income was not legal tender and was exempt from
tax.
e. A return where the taxpayer
claimed that income was not "constructively received" and the taxpayer was the
nominee-agent for a trust.
f. A
return with clearly inconsistent information.
g. A document filed for refund of taxes
erroneously collected with the contention that the document was not a return
and that no wage income was earned. This was inconsistent with attached W-2
Forms reporting wages.
h. A return
that includes falsified information or supporting documentation.
(2)
Nonexclusive examples
where the frivolous return penalty is not applicable. The following
examples illustrate situations where the frivolous return penalty would not be
applicable:
a. A return that includes a
deduction, credit, or other item that may constitute a valid item of dispute
between the taxpayer and the department.
b. A return that includes innocent or
inadvertent mathematical or clerical errors, such as an error in addition,
subtraction, multiplication, or division or the incorrect use of a table
provided by the department.
c. A
return that includes a statement of protest or objection, provided the return
contains all required information.
d. A return that shows the correct amount of
tax due, but the tax due is not paid.
This rule is intended to implement Iowa Code section
421.8.
