Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 10 - Interest, Penalty, Exceptions to Penalty, and Jeopardy Assessments › Rule 701-10.4 - Frivolous Return Penalty

Current through Register Vol. 47, No. 3, July 24, 2024
A $500 civil penalty is imposed on the return of a taxpayer
				  that is considered to be a "frivolous return." A "frivolous return" is:
(1) A return which lacks sufficient
				information from which the substantial correctness of the amount of tax
				liability can be determined or contains information that on its face indicates
				that the amount of tax shown is substantially incorrect, or
(2) a return which reflects a position of law
				which is frivolous or is intended to delay or impede the administration of the
				tax laws of this state.
If the frivolous return penalty is applicable, the penalty
				  will be imposed in addition to any other penalty which has been assessed. If
				  the frivolous return penalty is relevant, the penalty may be imposed even under
				  circumstances when it is determined that there is no tax liability on the
				  return.
The frivolous return penalty is virtually identical to the
				  penalty for frivolous income tax returns which is authorized in Section 6702 of
				  the Internal Revenue Code. The department will follow federal guidelines and
				  court cases when determining whether or not the frivolous return penalty should
				  be imposed.
The frivolous return penalty may be imposed on all returns
				  filed with the department and not just individual income tax returns. The
				  penalty may be imposed on an amended return as well as an original return. The
				  penalty may be imposed on each return filed with the department.
(1)
Nonexclusive examples of
				circumstances under which the frivolous return penalty may he imposed.
The following are examples of returns filed in circumstances under which the
				frivolous return penalty may be imposed:
a. A
				return claiming a deduction against income or a credit against tax liability
				which is clearly not allowed such as a "war," "religious," "conscientious
				objector" deduction or tax credit.
b. A blank or partially completed return that
				was prepared on the theory that filing a complete return and providing required
				financial data would violate the Fifth Amendment privilege against
				self-incrimination or other rights guaranteed by the Constitution.
c. An unsigned return where the taxpayer
				refused to sign because the signature requirement was "incomprehensible or
				unconstitutional" or the taxpayer was not liable for state tax since the
				taxpayer had not signed the return.
d. A return which contained personal and
				financial information on the proper lines but where the words "true, correct
				and complete" were crossed out above the taxpayer's signature and where the
				taxpayer claimed the taxpayer's income was not legal tender and was exempt from
				tax.
e. A return where the taxpayer
				claimed that income was not "constructively received" and the taxpayer was the
				nominee-agent for a trust.
f. A
				return with clearly inconsistent information such as when 99 exemptions were
				claimed but only several dependents were shown.
g. A document filed for refund of taxes
				erroneously collected with the contention that the document was not a return
				and that no wage income was earned. This was inconsistent with attached W-2
				Forms reporting wages.