Illinois Administrative Code › Title 86 - REVENUE › Part 700 - UNIFORM PENALTY AND INTEREST ACT › Subpart C - PENALTIES › Section 700.305 - Penalty for Late Payment of Tax (UPIA Section 3-3(b), (b-5), (b-10), (b-15), and (b-20))

Current through Register Vol. 48, No. 28, July 12, 2024
a) Late Payment
				Penalty for Returns Due (without regard to extensions) On or After January 1,
				1994 and On or Before January 1, 1998.
For returns due on or after
				January 1, 1994, and on or before January 1, 1998, a penalty of 15% of the tax
				shown on the return or the tax required to be shown due on the return shall be
				imposed
:
1)
For failure to
				pay the tax shown due on the return on or before the due date prescribed for
				payment of that tax, an amount of underpayment of estimated tax, or an amount
				that is reported in an amended return other than an amended return timely filed
				as required by IITA Section 506(b) (penalty for late payment or nonpayment of
				admitted liability).
(UPIA Section 3-3(b)(1))
EXAMPLE 1: Individual's income tax return for calendar year
				  1994 was due (without regard to extensions) by April 15, 1995, and the
				  liability after credits was $1,500. Individual owed 4 estimated tax installment
				  payments of $337.50 each, which were due on
				  April 15, June 15 and September 15 of 1994 and January 15 of 1995, but made
				  only the first payment of $337.50 in a timely manner.
				  Individual filed the return on April 15, and paid the remaining
				  $1,162.50 liability with the
				  return. Individual owes a penalty of $151.88
				  ($337.50 x 3 unpaid installments =
				  $1,012.50 estimated tax that was
				  due, and $1,012.50 x 15% penalty =
				  $151.88 late payment penalty)
				  because Individual failed to pay the amounts due for each estimated tax
				  installment.
EXAMPLE 2: Same facts as in Example 1 except that the return
				  was filed on October 1 and the remaining $1,162.50 tax
				  owed by Individual was paid with the return. In this situation, the return was
				  timely filed by virtue of the automatic extension until October 15 of the due
				  date for filing the return granted by 86 Ill. Adm. Code
				  100.5020(b),
				  but Individual owes a late payment penalty for failure to pay the unpaid
				  $1,012.50 in estimated tax
				  installments and the remaining $150 of the total liability because that amount
				  of tax was not paid on or before the unextended due date of the return.
				  Individual owes a late payment penalty of $174.38. The
				  penalty for failure to timely pay the unpaid $1,012.50 in
				  estimated tax installments is the $151.88 amount
				  computed in Example 1. Failure to timely pay the remaining $150 that was shown
				  due on the original return date is subject to penalty as prescribed by UPIA
				  Section 3-3(b)(1) of $22.50 ($1,500 - $1,350 = $150 x
				  15% = $22.50) for failure to pay the total tax by April 15.
2)
For failure to pay the full amount
				of any tax required to be shown due on a return and that is not shown (penalty
				for late payment or nonpayment of additional liability), within 30 days after a
				Notice of Arithmetic Error, Notice and Demand, or Final Assessment is issued by
				the Department. In the case of Final Assessment arising following a protest and
				hearing, the 30-day period shall not begin until all proceedings in court for
				review of the final assessment have terminated or the period for obtaining a
				review has expired without proceedings for a review having been instituted. In
				the case of a notice of tax liability that becomes a final assessment without a
				protest and hearing, the penalty provided in this subsection
(a)(2)
shall be imposed at the expiration of the period provided for the
				filing of a protest.
(UPIA Section 3-3(b)(2)) For purposes of this
				subsection (a)(2):
A) An amount of tax that
				was paid prior to the due date for payment is a timely payment of tax, even if
				some or all of that amount was refunded or credited to the taxpayer as a result
				of an overpayment reported on an original or amended return. (Compare UPIA
				Section 3-3(b)(2) with (b-20)(2).)
B) The 30-day period for providing payment in
				response to Department notices and final assessments is effective for notices
				and assessments issued on or after January 1, 1996. Payments in response to
				notices and assessments issued prior to January 1, 1996 were due within 21 days
				(the effective date of P.A. 89-436).
EXAMPLE 1: Corporation timely filed its income tax return for
				  calendar year 1994 by the March 15, 1995 unextended due date for calendar year
				  filers. Corporation properly made all estimated tax payments and paid the
				  remainder of its tax liability with the return. In 1997, the Department
				  completed an audit of Corporation's 1994 return and issued a notice of
				  deficiency for an additional liability of $5,000. Corporation protested the
				  notice of deficiency, which was ultimately upheld by the courts. Corporation is
				  subject to the late payment penalty of $750 (15% of $5,000) only if it does not
				  pay the additional liability within 30 days after the Department has issued a
				  Notice and Demand for Payment.
EXAMPLE 2: The facts are the same as in Example 1, except
				  that the additional liability of $5,000 assessed in 1997 is the result of a
				  federal change. If Corporation timely reported the federal change liability, it
				  is not subject to late payment penalty under subsection (a)(1) and is subject
				  to the late payment penalty under subsection (a)(2) only if it does not pay the
				  additional liability before the Department has issued a Notice and Demand for
				  Payment of the liability and 30 days have passed. If Corporation files its
				  report of the federal change liability after the due date, it is immediately
				  subject to late payment penalty under subsection (a)(1).
EXAMPLE 3: Corporation timely filed its income tax return for
				  calendar year 1993 by the March 15, 1994 unextended due date. Corporation
				  properly made all estimated tax payments and paid the remainder of its tax
				  liability with the return. In 1995, the Department completed an audit of
				  Corporation's 1994 return and issued a Notice of Deficiency for an additional
				  liability of $5,000. Corporation agreed to the additional liability and the
				  Department issued a Notice and Demand for the additional liability. If the
				  Notice and Demand was issued prior to January 1, 1996, Corporation is subject
				  to the late payment penalty under subsection (a)(2) only if it does not pay the
				  additional liability within 21 days. If the Notice and Demand was issued on or
				  after January 1, 1996, Corporation is subject to the late payment penalty under
				  subsection (a)(2) only if it does not pay the additional liability within 30
				  days.