HOW TO CALCULATE
IOWA INCOME TAX PENALTY AND INTEREST
ON
UNPAID TAX
Do you owe a penalty on your unpaid tax?
If you did not pay at least 90% of the tax you owe by the due date, you will have either a 5% or 10% penalty, depending on whether or not you filed your return on time. Interest is not charged on penalty. If you did not file your return by the due date and did not have at least 90% of the correct tax paid, you owe an additional 10% of the unpaid tax. Example: Your total tax liability for the year is $2,000. You have already paid $1,500. This is only 75% of what you owe. In addition, you did not file your return by the due date. Since you did not pay 90% by the due date and did not file by the due date, you must pay a 10% penalty. $500 x .10 = $50 in penalty charges. Your total unpaid tax and penalty is now $550. You must calculate interest on the $500 and add it to the $550. If you filed your return on time but did not pay at least 90% of the correct tax due by the due date, you owe an additional 5% of the unpaid tax. Interest is not charged on penalty. Example: Your total tax liability for the year is $2,000. You have already paid $1,500. This is only 75% of what you owe. However, you did file your return by the due date. Since you did not pay 90% by the due date, you must pay a 5% penalty. $500 x .05 = $25 in penalty charges. Your total unpaid tax and penalty is now $525. You must calculate interest on the $500 and add it to the $525.
Do you owe interest on your unpaid tax?
Any tax you do not pay by the due date is subject to interest charges. Interest is not charged on penalty. Interest is charged on a monthly basis. Part of a month constitutes a whole month. Since interest charges may change yearly, the following chart has been developed to easily calculate interest. The chart is updated each January. See page 2 for an example. TAX INTEREST RATE CHART Interest on the unpaid tax is to be computed using the table below. To find the applicable rate, find the tax year for which you are amending your return in the left hand column. Then go to the right until you reach the column for the month in which the amended return is filed.
TAX YEAR 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 7.1 16.7 25.5 32.3 38.3 45.1 53.9 64.3 74.3 83.9 93.5 103.1 113.5 123.5 132.3 141.5 7.8 17.4 26.2 33.0 39.0 45.8 54.6 65.0 75.0 84.6 94.2 103.8 114.2 124.2 133.0 142.2 8.5 18.1 26.9 33.7 39.7 46.5 55.3 65.7 75.7 85.3 94.9 104.5 114.9 124.9 133.7 142.9 9.2 18.8 27.6 34.4 40.4 47.2 56.0 66.4 76.4 86.0 95.6 105.2 115.6 125.6 134.4 143.6 JAN FEB MAR APR MAY 0.7 9.9 19.5 28.3 35.1 41.1 47.9 56.7 67.1 77.1 86.7 96.3 105.9 116.3 126.3 135.1 144.3 JUN 1.4 10.6 20.2 29.0 35.8 41.8 48.6 57.4 67.8 77.8 87.4 97.0 106.6 117.0 127.0 135.8 145.0 JUL 2.1 11.3 20.9 29.7 36.5 42.5 49.3 58.1 68.5 78.5 88.1 97.7 107.3 117.7 127.7 136.5 145.7 AUG 2.8 12.0 21.6 30.4 37.2 43.2 50.0 58.8 69.2 79.2 88.8 98.4 108.0 118.4 128.4 137.2 146.4 SEP 3.5 12.7 22.3 31.1 37.9 43.9 50.7 59.5 69.9 79.9 89.5 99.1 108.7 119.1 129.1 137.9 147.1 OCT 4.2 13.4 23.0 31.8 38.6 44.6 51.4 60.2 70.6 80.6 90.2 99.8 109.4 119.8 129.8 138.6 147.8 NOV 4.9 14.1 23.7 32.5 39.3 45.3 52.1 60.9 71.3 81.3 90.9 100.5 110.1 120.5 130.5 139.3 148.5 DEC 5.6 14.8 24.4 33.2 40.0 46.0 52.8 61.6 72.0 82.0 91.6 101.2 110.8 121.2 131.2 140.0 149.2
1
IOWA
DEPARTMENT OF
REVENUE (07/17/08)
EXAMPLE 1 OF CALCULATING INTEREST:
You are amending a 2007 Iowa income tax return. An additional tax of $500 is due. You are amending in August 2009. The interest rate to use is 12.0% . The computed interest is equal to: $500 X .120 = $60.00.
TAX YEAR 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 7.1 16.7 25.5 32.3 38.3 45.1 53.9 64.3 74.3 83.9 93.5 103.1 113.5 123.5 132.3 141.5 7.8 17.4 26.2 33.0 39.0 45.8 54.6 65.0 75.0 84.6 94.2 103.8 114.2 124.2 133.0 142.2 8.5 18.1 26.9 33.7 39.7 46.5 55.3 65.7 75.7 85.3 94.9 104.5 114.9 124.9 133.7 142.9 9.2 18.8 27.6 34.4 40.4 47.2 56.0 66.4 76.4 86.0 95.6 105.2 115.6 125.6 134.4 143.6 JAN FEB MAR APR MAY 0.7 9.9 19.5 28.3 35.1 41.1 47.9 56.7 67.1 77.1 86.7 96.3 105.9 116.3 126.3 135.1 144.3 JUN 1.4 10.6 20.2 29.0 35.8 41.8 48.6 57.4 67.8 77.8 87.4 97.0 106.6 117.0 127.0 135.8 145.0 JUL 2.1 11.3 20.9 29.7 36.5 42.5 49.3 58.1 68.5 78.5 88.1 97.7 107.3 117.7 127.7 136.5 145.7 AUG 2.8 12.0 21.6 30.4 37.2 43.2 50.0 58.8 69.2 79.2 88.8 98.4 108.0 118.4 128.4 137.2 146.4 SEP 3.5 12.7 22.3 31.1 37.9 43.9 50.7 59.5 69.9 79.9 89.5 99.1 108.7 119.1 129.1 137.9 147.1 OCT 4.2 13.4 23.0 31.8 38.6 44.6 51.4 60.2 70.6 80.6 90.2 99.8 109.4 119.8 129.8 138.6 147.8 NOV 4.9 14.1 23.7 32.5 39.3 45.3 52.1 60.9 71.3 81.3 90.9 100.5 110.1 120.5 130.5 139.3 148.5 DEC 5.6 14.8 24.4 33.2 40.0 46.0 52.8 61.6 72.0 82.0 91.6 101.2 110.8 121.2 131.2 140.0 149.2
EXAMPLE 2 OF CALCULATING PENALTY AND INTEREST:
You are filing your 2004 Iowa income tax return for the first time in December 2009. An additional tax of $500 is due. Calculate Interest The interest rate to use is 40.0% . The computed interest is equal to: $500 X .400 = $200.00. Calculate Penalty If you did not file the return on time and did not have 90% of the tax due already paid, you must pay a 10% penalty on the tax due: $500 X .10 = $50. Total Your Final Payment: Tax Due: ............. $500 Interest: .............. 200 Penalty: ................ 50 TOTAL DUE: ..... $750
2 IOWA
DEPARTMENT OF
REVENUE (07/17/08)