Iowa Department of Revenue
Penalty Exception Provisions

Our department may assess penalty on the following tax types:

• cigarette tax
• tobacco tax
• motor fuel tax
• individual income tax
• withholding tax
• corporate income tax
• franchise tax
• sales tax
• consumer’s tax
• retailer’s use tax
• environmental protection charge
• inheritance tax
• generation skipping transfer tax
• estate tax

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

1. Failure to timely file a return or deposit: 10%
2. Failure to timely pay the tax due on the return or deposit form: 5%
3. Audit deficiencies when the department determines additional tax is due: 5%
4. 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 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 proves 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: 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

78-626 (9/13/05)
Iowa Department of Revenue