(1)
Definitions. For the purposes of this rule, the following
definitions apply:
"Income statement" means a statement that
conforms to the requirements of Iowa Code section
422.16(7)
"a." An income statement includes, but is not limited to,
Internal Revenue Service (IRS) Form W-2, IRS Form 1099, and IRS Form
W-2G.
"Payee" means an employee or other person
who had Iowa income tax withheld pursuant to Iowa Code section
422.16.
"Payer" means an employer or other person
required to withhold and remit Iowa income tax pursuant to Iowa Code section
422.16.
(2)
Penalties for willful failure to
file or furnish an income statement or for willfully filing or furnishing a
false or fraudulent income statement.
a. Payers responsible for furnishing an
income statement to a payee as described in paragraph
307.3(4)
"d" and for filing an income statement with the
department as described in paragraph 307.3(4)
"e" shall be
subject to a $500 penalty for each instance of any of the following:
(1) Willful failure to furnish an income
statement to a payee by January 31 of the year following the year in which
income tax is withheld.
(2) Willful
failure to file an income statement with the department by February 15 of the
year following the year in which income tax is withheld.
(3) Willfully furnishing a false or
fraudulent income statement to a payee.
(4) Willfully filing a false or fraudulent
income statement with the department.
b. Penalties assessed under this subrule may
not be waived.
c. Penalties
assessed under this subrule are in addition to any other penalty allowed under
law.
(3)
Penalties for failure to file a return or failure to pay.
a. Payers are subject to the penalties
provided in Iowa Code section
421.27 for failure to file a
quarterly return and failure to remit any withholding due. A penalty assessed
under Iowa Code section
421.27 is in addition to any
penalty assessed under law. Rule
701-10.6 (421) contains a
further explanation and examples applying the penalties under Iowa Code section
421.27. The penalties imposed
under Iowa Code sections
421.27(1),
421.27(2), and
421.27(3) may
be subject to waiver. Rule
701-10.7 (421) contains details
on penalty waivers.
b. Pursuant to
Iowa Code section 421.27(4), if
the department determines that the payer willfully failed to file or pay with
the intent to evade tax or a filing requirement, the penalty shall be 75
percent of the unpaid tax. In this case, the penalty is not subject to
waiver.
(4)
Computation of interest on unpaid tax. Interest shall accrue
on tax due from the original due date of the return. Interest on refunds of any
portion of the tax imposed by statute which has been erroneously refunded and
which is recoverable by the department shall bear interest as provided by law
from the date of payment of the refund, with each fraction of a month
considered to be an entire month. Rule
701-10.2 (421) contains more
information about the statutory interest rate.
All payments shall be first applied to the penalty and then
to the interest, and the balance, if any, to the amount of tax due.
(5)
Computation of
interest on overpayments. If the amount of tax determined to be due by
the department is less than the amount paid, the excess to be refunded will
accrue interest from the first day of the second calendar month following the
date of payment or the date the return was due to be filed or was filed,
whichever is later.
(6)
Examples.
EXAMPLE 1: Employer has ten employees, all residing in Iowa.
After the close of the tax year, Employer fails to furnish two of its employees
with W-2s by January 31 of the following year. Additionally, Employer fails to
file any W-2s with the department by February 15 of the following year and does
not request an extension. If the department determines that Employer's failures
to furnish two W-2s to its employees and file ten W-2s with the department were
willful, the department shall assess a penalty in the amount of $6,000 (12
instances x $500).
EXAMPLE 2: The same facts as Example 1, but the department
determines Employer underpaid its withholding obligations by $2,000 for the tax
year. Employer timely filed its required quarterly returns. In addition to the
penalties assessed in Example 1, Employer shall be assessed a penalty of $100
(5% x $2,000) for failure to pay, plus interest calculated pursuant to subrule
307.5(5). If the department determines Employer willfully underpaid and filed a
false return in order to avoid paying Iowa withholding, the department shall
assess a penalty of $1,500 (75% x $2,000).
This rule is intended to implement Iowa Code sections
421.27,
422.16, and
422.25.
