Free Pub 58 Interest and Penalties - Utah

tax.utah.gov

Publication 58
Revised 11/08

Interest and Penalties

Utah State Tax Commission 210 North 1950 West Salt Lake City, Utah 84134 801-297-7705 1-800-662-4335 ext. 7705 www.tax.utah.gov

If you need an accommodation under the Americans with Disabilities Act, contact the Tax Commission at 801-297-3811, or TDD 801-297-2020. Please allow three working days for a response.

Contents
Introduction ...................................................................................... 1 Interest............................................................................................. 1 General Information ................................................................... 1 Interest Rates ............................................................................ 1 Overpayments ........................................................................... 2 Underpayments ......................................................................... 2 Application of Payment .............................................................. 2 Calculation Guidelines ............................................................... 2 Interest Calculation Formula ................................................ 2 Exceptions ................................................................................. 2 Penalties .......................................................................................... 2 General Information ................................................................... 2 Late Filing Penalty and Late Payment Penalty........................... 2 CHART 1 .............................................................................. 3 CHART 2 .............................................................................. 4 CHART 3 .............................................................................. 5 CHART 4 .............................................................................. 6 CHART 5 .............................................................................. 7 CHART 6 .............................................................................. 8 CHART 7 .............................................................................. 9 Failure to Make Sufficient Prepayment (Extension Penalty) .... 10 Underpayment of Corporation Estimated Tax Payments ......... 10 Additional Penalties and Fines................................................. 10 Preparer Penalties ................................................................... 11 Waivers .......................................................................................... 11

Introduction
This publication explains how the Utah State Tax Commission assesses penalties and interest on Utah tax returns. See Utah Code §§59-1-401 and 402 for more information about penalties and interest.

Interest
General Information
Utah Code §59-1-402 is the primary authority for interest assessed for all taxes and fees administered by the Tax Commission. Unless otherwise provided by law, the interest rate for a calendar year is calculated based on the federal short-term rate determined by the Secretary of the Treasury under the Internal Revenue Code Section 6621 and in effect for the fourth quarter of the preceding calendar year. The calendar-year simple interest rate for taxes and fees administered by the Tax Commission is two percentage points above the federal short-term rate and is used to calculate interest for overpayments, refunds, underpayments, deficiencies and delinquencies. The Tax Commission has an online Penalty and Interest Calculator to help compute penalty and interest due on an individual income tax return. This calculator is located at tax.utah.gov/picalc.

Interest Rates
The interest rates on underpayment and overpayment of taxes and fees administered by the Tax Commission are: Period Percentage Rate Jan. 1, 2009 - Dec. 31, 2009 ...........................5% Jan. 1, 2007 - Dec. 31, 2008 ...........................7% Jan. 1, 2006 ­ Dec. 31, 2006 ..........................6% Jan. 1, 2005 ­ Dec. 31, 2005 ..........................4% Jan. 1, 2004 ­ Dec. 31, 2004 ..........................3% Jan. 1, 2003 ­ Dec. 31, 2003 ..........................5% Jan. 1, 2002 ­ Dec. 31, 2002 ..........................6%

Jan. 1, 2001 ­ Dec. 31, 2001 ..........................8% Jan. 1, 1999 ­ Dec. 31, 2000 ..........................7% Jan. 1, 1995 ­ Dec. 31, 1998 ..........................8% Oct. 12, 1993 ­ Dec. 31, 1994 ........................6% Prior to Oct. 12, 1993 .....................................12% IFTA: The interest rate for late payments on IFTA accounts is established by rules and regulations set forth by the International Fuel Trade Agreement. The current interest rate for late payments is 12 percent per annum, or one percent per month or any part thereof.

interest-rate period shall be calculated for the number of days in the period, divided by 365. The calculation should be rounded to two decimal places.

Interest Calculation Formula
(underpayment) x (interest rate) x (number of days) / 365 Example: Interest due would be calculated on a tax return due April 15, 2008 and paid on February 15, 2009 with a balance of tax due of $1,500 as follows: Period 04/15/2008 ­ 12/31/2008 ($1,500 x .07 x 260/365) 01/01/2009 ­ 02/15/2009 ($1,500 x .05 x 46/365) Total interest due Days 260 46 Rate 7% 5% Interest $74.79 $9.45 $84.24

Overpayments
Generally, interest is not allowed on an overpayment of tax if the overpayment is refunded within 90 days after the later of: · The date the return is due; · The date the return is filed; or · The date of the overpayment. Interest will be calculated beginning on the 91st day from the later of the dates listed above. If an overpayment is generated as a result of an amended return or a request for refund, interest will accrue from the later of the date the original return was filed or the due date (not including any extensions) for filing the original return, to the date the Tax Commission receives the amended return or request. If the Tax Commission does not refund the overpayment shown on the amended return within 90 days after the date the amended return was received, interest will resume beginning on the 91st day after the amended return was received and ending on the date the Tax Commission completes the processing of the amended return refund. Interest will stop accruing on a Utah amended return overpayment that resulted from an Internal Revenue Service audit if not filed within 90 days after the conclusion of the audit. (Utah Code §59-10-529(14)(b).) Interest will not be paid on refunds arising from a judicial decision that declares a statute to be invalid under federal or state law or unconstitutional under the constitutions of the United States or the State of Utah.

Exceptions
The following taxes and fees administered by the Tax Commission are not subject to the interest calculation discussed in this publication: · Title 41, Chapter 1a ­ Motor Vehicle Act (except for Section 41-1a-301 dealing with fees related to the apportioned registration and licensing of interstate commercial vehicles); · Title 41, Chapter 3 ­ Motor Vehicle Business Regulation; · Title 59, Chapter 2 ­ Property Tax Act (except for Section 59-2-1309 dealing with fees related to the redemption of certain centrally assessed property seized by the Commission); · Title 59, Chapter 3 ­ Tax Equivalent Property Act; · Title 59, Chapter 4 ­ Privilege Tax;

Penalties
General Information
Utah Code §59-1-401 provides tax penalties for failure to file tax returns (late filing penalty), failure to pay tax due on returns and audit assessments (late payment penalty), and failure to file information returns or supporting schedules. Penalties are separated by tax type and the date returns are filed or the date audit assessments become final.

Underpayments
Interest shall be assessed on any underpayment, deficiency, or delinquency of taxes and fees administered by the Tax Commission from the date the original return was due to the date the full payment is received by the Tax Commission.

Application of Payment
Payments received by the Tax Commission are first applied to any outstanding penalties, second to any accrued interest, and lastly to any outstanding tax due for the unpaid filing period. If any collection activity fees are associated with the payment, unless otherwise designated by statute, such fees will be paid first, followed by penalties, interest, and then tax. If outstanding liabilities exist for more than one tax period, unless otherwise designated by the taxpayer, the Tax Commission will apply any payment to the oldest period first. See Tax Commission Rule R861-1A-18.

Late Filing Penalty and Late Payment Penalty
The late filing penalty and the late payment penalty may be assessed for returns not filed and payments not made by the due date, or the extension due date, if applicable. The late filing penalty does not apply to an amended return. To avoid the late payment penalty on an amended return, you must pay all tax, interest, and applicable extension penalty with the return. The late payment penalty does not apply to a return with no tax due. You must pay all tax, interest, and penalties the same day the return is filed to avoid the late payment penalty. The following seven charts summarize the application of the late filing and late payment penalties. In addition, other penalties may apply to the tax types. Please see the Utah code sections noted for additional information. page 2

Calculation Guidelines

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If an underpayment or overpayment spans more than one interest-rate period, interest shall be calculated based on the rate in effect for each interest-rate period. Interest for each

CHART 1
For the following tax types:
· Aviation Fuel Tax (59-13-401) · Beer Tax (59-15) · Brine Shrimp Royalty Tax (59-23-8) · Cigarette/Tobacco Tax (59-14) · Emergency Services Telephone (poison control) (69-2-5.5) · Environmental Assurance Fee (19-6-410.5) · Gross Receipts (59-8-101 & 59-24-109) · Inheritance (59-11-107) · Insurance Premiums (59-9-101) · Lubricating Oil (19-6-714) · Mining Severance Tax (59-5-207) · Motor Fuel (59-13-201) · Municipal Energy (10-1-301) · Municipal Telecomm (10-1-401) · Oil and Gas Severance (59-5-106) · Radioactive Waste (59-24-103) · Special Fuels (59-13-301) · Self-insured Employers (34A-2-202) · 911 Emergency Telephone (69-2-5)

Effective Period
Effective for all tax periods

Failure to File (Late Filing) Penalty
Greater of $20 or 10% of unpaid tax, fee or charge on return

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: Greater of $20 or 10% of unpaid tax, fee or charge on return Return filed after due date and not paid in full within 90 days of due date: Greater of $20 or 10% of unpaid tax, fee or charge on return Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: Greater of $20 or 10% of unpaid tax, fee or charge on amended return Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: Greater of $20 or 10% of unpaid deficiency assessment

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CHART 2
For the following tax types:
· Individual Income Tax (59-10, Part 1) · Fiduciary Tax (59-10, Part 2) · Sales and Use Tax (59-12) · Sales Related Taxes (59-12) · Waste Tire Fee (19-6-808)

Effective Period
Effective through February 2008

Failure to File (Late Filing) Penalty
Greater of $20 or 10% of unpaid tax, fee or charge on return

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: Greater of $20 or 10% of unpaid tax, fee or charge on return Return filed after due date and not paid in full within 90 days of due date Greater of $20 or 10% of unpaid tax, fee or charge on return Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: Greater of $20 or 10% of unpaid tax, fee or charge on amended return Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: Greater of $20 or 10% of unpaid deficiency assessment

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CHART 3
For the following tax types:
· Individual Income Tax (59-10, Part 1) · Fiduciary Tax (59-10, Part 2) · Sales and Use Tax (59-12) · Sales Related Taxes (59-12) · Waste Tire Fee (19-6-808)

Effective Period
Effective after February 2008

Failure to File (Late Filing) Penalty
1 thru 5 days late: Greater of $20 or 2% of unpaid tax, fee or charge on return 6 thru 15 days late: Greater of $20 or 5% of unpaid tax, fee or charge on return 16 or more days late: Greater of $20 or 10% of unpaid tax, fee or charge on return

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: · 1 thru 5 days late - greater of $20 or 2% of unpaid tax, fee or charge on return · 6 thru 15 days late - greater of $20 or 5% of unpaid tax, fee or charge on return · 16 or more days late - greater of $20 or 10% of unpaid tax, fee or charge on return Return filed after due date and not paid in full within 90 days of due date: · 91 thru 95 days late - greater of $20 or 2% of unpaid tax, fee or charge on return · 96 thru 105 days late - greater of $20 or 5% of unpaid tax, fee or charge on return · 106 or more days late - greater of $20 or 10% of unpaid tax, fee or charge on return Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: · 1 thru 5 days after original return due date - greater of $20 or 2% of unpaid tax, fee or charge on return · 6 thru 15 days after original return due date - greater of $20 or 5% of unpaid tax, fee or charge on return · 16 or more days after original return due date - greater of $20 or 10% of unpaid tax, fee or charge on return Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: · 31 thru 35 days late - greater of $20 or 2% of unpaid audit assessment · 36 thru 45 days late - greater of $20 or 5% of unpaid audit assessment · 46 or more days late - greater of $20 or 10% of unpaid audit assessment

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CHART 4
For the following tax types:
· Corporate Franchise and Income Tax (59-7) · Partnership Tax (59-10-507) · Withholding Income Tax (59-10, Part 4) · Mineral Production Withholding Tax (59-6) Effective Period
Effective through February 2009

Failure to File (Late Filing) Penalty
Greater of $20 or 10% of unpaid tax, fee or charge on return

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: Greater of $20 or 10% of unpaid tax, fee or charge on return Return filed after due date and not paid in full within 90 days of due date: Greater of $20 or 10% of unpaid tax, fee or charge on return Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: Greater of $20 or 10% of unpaid tax, fee or charge on amended return Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: Greater of $20 or 10% of unpaid deficiency assessment

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CHART 5
For the following tax types:
· Corporate Franchise and Income Tax (59-7) · Partnership Tax (59-10-507) · Withholding Income Tax (59-10, Part 4) · Mineral Production Withholding Tax (59-6) Effective Period
Effective after February 2009

Failure to File (Late Filing) Penalty
1 thru 5 days late: Greater of $20 or 2% of unpaid tax, fee or charge on return 6 thru 15 days late: Greater of $20 or 5% of unpaid tax, fee or charge on return 16 or more days late: Greater of $20 or 10% of unpaid tax, fee or charge on return

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: · 1 thru 5 days late - greater of $20 or 2% of unpaid tax, fee or charge on return · 6 thru 15 days late - greater of $20 or 5% of unpaid tax, fee or charge on return · 16 or more days late - greater of $20 or 10% of unpaid tax, fee or charge on return Return filed after due date and not paid in full within 90 days of due date: · 91 thru 95 days late - greater of $20 or 2% of unpaid tax, fee or charge on return · 96 thru 105 days late - greater of $20 or 5% of unpaid tax, fee or charge on return · 106 or more days late - greater of $20 or 10% of unpaid tax, fee or charge on return Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: · 1 thru 5 days after original return due date - greater of $20 or 2% of unpaid tax, fee or charge on return · 6 thru 15 days after original return due date - greater of $20 or 5% of unpaid tax, fee or charge on return · 16 or more days after original return due date - greater of $20 or 10% of unpaid tax, fee or charge on return Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: · 31 thru 35 days late - greater of $20 or 2% of unpaid audit assessment · 36 thru 45 days late - greater of $20 or 5% of unpaid audit assessment · 46 or more days late - greater of $20 or 10% of unpaid audit assessment

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CHART 6
· IFTA Tax (59-13-5)

Effective Period
Effective through April 2009

Failure to File (Late Filing) Penalty
Greater of $50 or 10% of the net tax due, plus sales tax, less fuel credits

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: Greater of $50 or 10% of the net tax due, plus sales tax, less fuel credits Return filed after due date and not paid in full within 90 days of due date: Greater of $50 or 10% of the net tax due, plus sales tax, less fuel credits Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: Greater of $50 or 10% of the net tax due, plus sales tax, less fuel credits Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: Greater of $50 or 10% of unpaid deficiency assessment

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CHART 7
· IFTA Tax (59-13-5)

Effective Period
Effective after April 2009

Failure to File (Late Filing) Penalty
1 thru 5 days late: Greater of $20 or 2% of unpaid tax, fee or charge on return 6 thru 15 days late: Greater of $20 or 5% of unpaid tax, fee or charge on return 16 or more days late: Greater of $20 or 10% of unpaid tax, fee or charge on return

Failure to Pay (Late Payment) Penalty
Return filed by due date but underpaid: · 1 thru 5 days late - greater of $20 or 2% of unpaid tax, fee or charge on return · 6 thru 15 days late - greater of $20 or 5% of unpaid tax, fee or charge on return · 16 or more days late - greater of $20 or 10% of unpaid tax, fee or charge on return Return filed after due date and not paid in full within 90 days of due date: · 91 thru 95 days late - greater of $20 or 2% of unpaid tax, fee or charge on return · 96 thru 105 days late - greater of $20 or 5% of unpaid tax, fee or charge on return · 106 or more days late - greater of $20 or 10% of unpaid tax, fee or charge on return Failure to pay when return not filed: Greater of $20 or 10% of applicable unpaid tax, fee or charge Amended return filed after original return due date and not paid in full with amended return: · 1 thru 5 days after original return due date - greater of $20 or 2% of unpaid tax, fee or charge on return · 6 thru 15 days after original return due date - greater of $20 or 5% of unpaid tax, fee or charge on return · 16 or more days after original return due date - greater of $20 or 10% of unpaid tax, fee or charge on return Audit deficiency not paid in full within 30 days of deficiency notice, final commission order or final judicial order: · 31 thru 35 days late - greater of $20 or 2% of unpaid audit assessment · 36 thru 45 days late - greater of $20 or 5% of unpaid audit assessment · 46 or more days late - greater of $20 or 10% of unpaid audit assessment

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Failure to Make Sufficient Prepayment (Extension Penalty)
An automatic six-month extension to file a return is granted for individual, fiduciary, partnership and corporation tax returns. However, the extension does not apply to the payment of any balance of tax due on the return. Payments are due on the original due date of the return. A failure to make sufficient prepayment penalty will apply if the prepayment conditions below are not met by the original due date of the return. · Total prepayments (withholding, payments applied from previous year refunds, nonrefundable credit carryovers, other nonrefundable and refundable credits, and prepayments previously made) must equal 90 percent of the current year's tax liability, or · Total prepayments must equal 100 percent of the immediately preceding year's tax liability. If there is an underpayment of tax after applying the above criteria, the penalty on the underpayment will be assessed at a rate of 2 percent per month, calculated on a daily basis, until the date the return is filed or the extension expires. The formula for calculating the penalty is: (underpayment) x .24* x (number of days outstanding) / 365 * 2 percent rate per month up to a maximum of six months, or 12 percent (annual 24 percent) Note the following additional items: · The extension to file does not cancel the requirement to pay by the due date. Interest will be assessed on any unpaid tax from the original due date of the return until the date the tax is paid. · If you use an extension to file, any extension penalty and interest due should be paid with the return. · If the previous year individual or fiduciary income tax return was filed and the tax was zero, no prepayment is required. If there is no previous year return, the required prepayment is 90 percent of the current year's tax liability. · Corporations subject to the minimum tax must pay the required $100 minimum tax (per corporation in a combined group) even when there was no previous year return. · If the return is not filed by the extension due date, failure to file and failure to pay penalties will apply, as if the extension had not been granted. The failure to make sufficient prepayment penalty will then not apply.

Quarterly estimated tax payments are due in four equal payments on the 15th day of the 4th, 6th, 9th and 12th months of the corporation's taxable year. The prepayments must total the lesser of 90 percent of the current year's tax liability or 100 percent of the prior year's tax liability. (See specific details in the TC-20, corporation tax booklet.) Failure to make the required estimated tax payments could result in an underpayment of estimated tax penalty in addition to the above failure to make sufficient prepayment penalty. The penalty rate for the underpayment of estimated tax for a corporation is the interest rate provided under Section 59-1-402 (see above) plus four percentage points. For example, the penalty rate for the calendar year 2007 would be 11 percent (7 percent regular interest rate + 4 percent additional penalty rate). The penalty rate is applied to the underpayment amount calculated for each estimated tax period, multiplied by the number of days in the period and divided by 365. Exceptions may apply to negate the penalty. (See specific details in the TC-20, corporation tax booklet.)

Additional Penalties and Fines
Utah Code provides for additional penalties in the following circumstances: · If any underpayment of tax is due to negligence, the penalty is 10 percent of the underpayment. · If any underpayment of tax is due to intentional disregard of law or rule, the penalty is 15 percent of the underpayment. · If any underpayment results from intent to evade the tax, the penalty is the greater of $500 per period or 50 percent of the tax due. · If the underpayment is due to fraud with intent to evade the tax, the penalty is the greater of $500 per period or 100 percent of the underpayment. · If there is a failure to file an information return or a complete supporting schedule, the penalty is $50 for each return or schedule up to a maximum of $1,000. · If a taxpayer, in furtherance of a frivolous position, has a prima facie intent to delay or impede administration of the tax law and files a purported return that fails to contain information from which the correctness of reported tax liability can be determined or that clearly indicates the tax liability shown must be substantially incorrect, the penalty is $500. · Any person required to collect, truthfully account for, and pay over any state, local and related sales and use tax; municipal energy tax; municipal telecommunications tax; motor fuel, clean fuel, special fuel and aviation fuel tax; and withholding tax, who willfully fails to collect the tax, fails to truthfully account for and pay over the tax, or attempts in any manner to evade or defeat any tax or the payment of the tax, shall be liable for a penalty equal to the total amount of the tax evaded, not collected, not accounted for, or not paid over. This penalty is in addition to other penalties provided by law.

Underpayment of Corporation Estimated Tax Payments
Corporations are required to make estimated tax payments if their current year tax liability is $3,000 or more, or if the tax liability for the previous tax year was $3,000 or more (unless a first time filer -- see previous section). This provision applies also to parent corporations filing combined reports with affiliated companies when the aggregate amount of tax due is $3,000 or more for all corporations included in the combined report, including those paying only the minimum tax. A corporation is not subject to the estimated tax payment requirements the first year the corporation is required to file a Utah return if the corporation makes a payment on or before the due date, not including extensions, equal to or greater than the minimum tax.

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· Any person who, with intent to evade any tax or requirement of Title 59, Revenue and Taxation, of the Utah Code, or any lawful requirement of the Tax Commission, fails to make, render, sign, or verify any return or to supply any information within the time required by law, or who makes, renders, signs, or verifies any false or fraudulent return or statement, or who supplies any false or fraudulent information, is guilty of a third degree felony, and may be fined not less than $1,000 or more than $5,000. · Any person who intentionally or willfully attempts to evade or defeat any tax or the payment of a tax is, in addition to other penalties provided by law, guilty of a second degree felony, and may be fined not less than $1,500 or more than $25,000.

Preparer Penalties
The person who prepares, presents, procures, advises, aids, assists or counsels another on a return, affidavit, claim or similar document administered by the Tax Commission, and who knows or has reason to believe it may understate a tax, fee or charge is subject to both a civil penalty ($500 per document) and criminal penalties (second degree felony plus a fine from $1,500 to $25,000). See Utah Code §59-1-401(9) and (10) for specific details.

Waivers
Utah Code §59-1-401(11) authorizes the Tax Commission to waive, reduce, or compromise any penalties or interest that may be imposed, based on reasonable cause. For more information about waiver procedures and reasonable cause, see Tax Commission Pub 17.

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