1. Failure to timely file a return.
a. If a person fails to file a return with the department on or before the due date, there
shall be added to the tax remaining unpaid by the due date a penalty of five percent of the
remaining unpaid tax.
b. In the case of a specified business with no tax due that fails to timely file an income
return, the specified business shall pay the greater of the following penalty amounts:
(1) Two hundred dollars.
(2) An amount equal to five percent of the imputed Iowa liability of the specified business,
not to exceed twenty-five thousand dollars.
c. The penalty, if assessed pursuant to paragraph “a” or “b”, shall be in addition to any
other penalty provided by law.
d. The penalty, if assessed pursuant to paragraph “a” or “b”, shall be waived by the
department upon a showing by the taxpayer of any of the following conditions:
(1) An amount of tax greater than zero is due and at least ninety percent of the tax due
has been paid by the due date of the tax.
(2) (a) A taxpayer who is required to file a monthly or quarterly return may have one late
return or one late payment within a three-year period.
(b) If the taxpayer receives a waiver of a penalty under this subparagraph, the taxpayer
must make timely filings and payments for three years prior to being eligible for receiving
another waiver under this subparagraph. If the taxpayer receives a waiver under this
subparagraph, the waiver shall apply to penalties assessed under this subsection and
subsection 2.
(c) The use of any other penalty exception shall not count as a late return or late payment
for purposes of receiving a waiver by the taxpayer under this subparagraph.
(3) The death of a taxpayer, death of a member of the immediate family of the taxpayer,
or death of 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.
(4) The onset of serious, long-term illness or hospitalization of the taxpayer, of a member
of the immediate family of the taxpayer, or of 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.
(5) Destruction of records by fire, flood, or other act of God when the destruction
interferes with the timely filing of a return or timely payment of tax.
(6) 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 of the failure to file or failure to pay, and
that 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.
(7) Reliance upon results in a previous audit was a direct cause for the failure to file or
the failure to 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 the adoption,
amendment, or repeal of a rule or law.
(8) Under rules prescribed by the director, 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.
(9) The return or payment is timely, but erroneously, mailed with adequate postage to the
internalrevenueservice,anotherstateagency,oralocalgovernmentagencyandthetaxpayer
provides proof of timely mailing with adequate postage.
(10) 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.
(11) The failure to file was discovered through a sanctioned self-audit program conducted
by the department.
(12) If 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
thetaxpayer. “Electronicfundstransfer”meansanytransferoffunds,otherthanatransaction
originated by check, draft, or similar paper instrument, that is initiated through an electronic
terminal telephone, computer, magnetic tape, or similar device for the purpose of ordering,
instructing, or authorizing a financial institution to debit or credit an account.
(13) For a death occurring before January 1, 2025, that an Iowa inheritance tax return is
filed for an estate within the later of nine months from the date of death or sixty days from
the filing of a disclaimer by the beneficiary of the estate refusing to take the property or right
or interest in the property.
2. Failure to timely pay tax due. If a person fails to pay the tax due on or before the due
date, thereshallbeaddedtothetaxremainingunpaidbytheduedateapenaltyoffivepercent
of the unpaid tax. The penalty shall be in addition to any other penalty provided by law. The
penalty, if assessed, shall be waived by the department upon a showing by the taxpayer of
any of the following conditions:
a. Any reason listed under subsection 1, paragraph “d”, except subsection 1, paragraph
“d”, subparagraph (11).
b. 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.
c. (1) Except in the case of a final federal partnership adjustment governed by
subparagraph (2), the taxpayer voluntarily files an amended return which includes a copy
of the federal document showing the final disposition or final federal adjustments and pays
any additional Iowa tax due within one hundred eighty days of the final determination date
of the federal government’s audit. For purposes of this subparagraph, “final determination
date” means the same as defined in section 422.25.
(2) (a) In the case of a final federal partnership adjustment arising from a partnership
levelaudit,withrespecttotheauditedpartnershiporadirectpartnerorindirectpartnerofthe
audited partnership, the audited partnership, direct partner, or indirect partner voluntarily
and timely complies with its reporting and payment requirements under section 422.25A,
subsection 4 or 5.
(b) As used in this subparagraph, all words and phrases shall have the same meaning as
defined in section 422.25A.
3. Audit and examination deficiencies. If any person fails to pay the tax due and the
department discovers the underpayment, there shall be added to the tax a penalty of five
percent of the unpaid tax, which shall be in lieu of the penalty in subsection 2. The penalty,
if assessed, shall be waived by the department upon a showing by the taxpayer of any of the
following conditions:
a. At least ninety 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 that 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 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. Under rules prescribed by the director, 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.
4. Willful failure to file or pay.
a. (1) In case of willful failure to file a return with the intent to evade tax or a filing
requirement, willful failure to pay with the intent to evade tax, or in case of willfully filing
a false return with the intent to evade tax, in lieu of the penalties otherwise provided in
this section, there shall be added to the tax remaining unpaid by the due date a penalty of
seventy-five percent of the unpaid tax.
(2) In case of a willful failure by a specified business to file an income return with no
tax due with intent to evade a filing requirement, or in case of willfully filing a false income
return with no tax due with the intent to evade reporting of Iowa-source income, the penalty
imposed shall be the greater of the following amounts:
(a) One thousand five hundred dollars.
(b) An amount equal to seventy-five percent of the imputed Iowa liability of the specified
business.
b. The penalties imposed under this subsection are not subject to waiver.
5. Failure to remit on extension. If a person fails to remit at least ninety percent of the
tax due by the time an extension for further time to file a return is made, there shall be added
to the tax due a penalty of ten percent of the unpaid tax.
6. Liability — fraudulent practice. A person who makes an erroneous application for
refund, credit, reimbursement, rebate, or other payment shall be liable for any overpayment
received or tax liability reduced plus interest at the rate in effect under section 421.7.
a. In addition, a person commits a fraudulent practice and is liable for a penalty equal
to seventy-five percent of the refund, credit, exemption, reimbursement, rebate, or other
payment or benefit being claimed if the person does any of the following:
(1) Willfully makes a false or frivolous application for refund, credit, exemption,
reimbursement, rebate, or other payment or benefit with intent to evade tax or with intent to
receive a refund, credit, exemption, reimbursement, rebate, or other payment or benefit, to
which the person is not entitled.
(2) Willfully submits any false information, document, or document containing false
information in support of an application for refund, credit, exemption, reimbursement,
rebate, or other payment or benefit with the intent to evade tax or with intent to receive a
refund, credit exemption, reimbursement, rebate, or other payment or benefit, to which the
person is not entitled.
(3) Willfully submits with any false information, document, or document containing false
information in support of an application for refund with the intent to evade tax or with intent
to receive a refund, credit, exemption, reimbursement, rebate, or other payment benefit, to
which the person is not entitled.
b. Payments, penalties, and interest due under this subsection may be collected and
enforced in the same manner as the tax imposed.
c. Penalties imposed under this subsection are not subject to waiver.
7. Failure to use required form or manner. If a person fails to remit payment of taxes in
theformormannerrequiredbytherulesofthedirector, thereshallbeaddedtotheamountof
the tax a penalty of five percent of the amount of the payment remitted in the incorrect form
or manner not to exceed five hundred dollars per instance of incorrect form or manner of
payment. The penalty shall be in addition to any other penalty provided by law. The penalty
imposed by this subsection shall be waived if the taxpayer did not receive notification of
the requirement to remit tax payments electronically or if the electronic transmission of the
paymentwasnotinaformatorbymeansspecifiedbythedirectorandthepaymentwasmade
before the taxpayer was notified of the requirement to remit tax payments electronically.
8. Additional penalty. In addition to the penalties imposed by this section, if a taxpayer
fails to file a return within ninety days of written demand issued by the department pursuant
to the rules implementing this subsection that the taxpayer is required to do so, there shall be
added to the amount due a penalty in the amount of one thousand dollars. The penalty shall
be waived by the department upon a showing of good reason as defined by the department
by rule.
9. Definitions. As used in this section:
a. “Imputed Iowa liability” means any of the following:
(1) In the case of corporations other than corporations described in section 422.34 or
section 422.36, subsection 5, the corporation’s Iowa net income after the application of the
Iowabusinessactivityratio,ifapplicable,multipliedbythetopincometaxrateimposedunder
section 422.33 for the tax year, less any Iowa tax credits available to the corporation.
(2) In the case of financial institutions as defined in section 422.61, the financial
institution’s Iowa net income after the application of the Iowa business activity ratio, if
applicable, multiplied by the franchise tax rate imposed under section 422.63 for the tax
year, less any Iowa tax credits available to the financial institution.
(3) In the case of all other entities, including corporations described in section 422.36,
subsection5, andallotherentitiesrequiredtofileaninformationreturnundersection422.15,
subsection 2, the entity’s Iowa net income after the application of the Iowa business activity
ratio, if applicable, multiplied by the income tax rate imposed under section 422.5 for the tax
year, less any Iowa tax credits available to the entity.
b. “Income return” means an income tax return or information return required under
section 422.15, subsection 2, or section 422.36, 422.37, or 422.62.
c. “Specified business” means a partnership or other entity required to file an information
returnundersection422.15, subsection2, acorporationrequiredtofileareturnundersection
422.36 or 422.37, or a financial institution required to file a return under section 422.62.