86 Ill. Adm. Code 700.305
Penalty for Late Payment of Tax (UPIA Section 3-3(b), (b-5), (b-10), (b-15), and (b-20))
Section 700.305 Penalty for Late Payment of Tax (UPIA
Section 3-3(b), (b-5), (b-10), (b-15), and (b-20))
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.
b) Late Payment
Penalty for Returns Due (without regard to extensions) On or After January 1,
1998 and On or Before December 31, 2000.
For returns due on and after
January 1, 1998 and on or before December 31, 2000, a penalty of 20% 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 the underpayment of estimated
tax, or an amount that is reported in an amended return other than an amended
return timely filed as a requirement of IITA Section 506(b) (penalty for late
payment or nonpayment of admitted liability).
(UPIA Section 3-3(b-5)(1))
EXAMPLE 1: Individual's income
tax return for calendar 1997 was due (without regard to extensions) by April
15, 1998, 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 1997 and January 15 of 1998, 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 $202.50 ($337.50 x 3 unpaid installments = $1,012.50
estimated tax that was due, and $1,012.50 x 20% penalty = $202.50 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
$232.50. The penalty for failure to timely pay the unpaid $1,012.50 in
estimated tax installments is the $202.50 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 $30.00 ($1,500
- $1,350 = $150 x 20% = $30.00) for failure to pay the total tax by April 15.
2)
For
failure to pay the full amount of the 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 a 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 a
proceeding 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 (b) shall be imposed at the expiration of the
period provided for the filing of a protest.
(UPIA Section 3-3(b-5)(2))
EXAMPLE 1: Corporation timely
filed its income tax return for calendar year 1997 by the March 15, 1998
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 2000, the Department completed an audit of Corporation's 1997 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 $1,000 (20%
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 for
1997 was the result of a federal change. If Corporation timely reported the
federal change liability, it is not subject to late payment penalty under
subsection (b)(1) and is subject to the late payment penalty under subsection
(b)(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 filed its report of the federal change liability after
the due date, it is immediately subject to late payment penalty under subsection
(b)(1).
3) For
purposes of this subsection (b), 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-5)(2)
with (b-20)(2).)
c) Late
Payment Penalty for Returns Due (without regard to extensions) On or After
January 1, 2001 and On or Before December 31, 2003.
For returns due on and after
January 1, 2001 and on or before December 31, 2003, a penalty is imposed:
1)
For
failure to pay the tax shown due on a 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).
A)
The
amount of the penalty imposed shall be:
i)
2%
of any amount that is paid no later than 30 days after the due date;
ii)
5%
of any amount that is paid later than 30 days after the due date and not later
than 90 days after the due date;
iii)
10%
of any amount that is paid later than 90 days after the due date and not later
than 180 days after the due date; and
iv)
15%
of any amount that is paid later than 180 days after the due date.
B) Effective
July 25, 2002,
if Notice and Demand is made for the payment of any amount of
tax due and if the amount due is paid within 30 days after the date of the
Notice and Demand, then the penalty for late payment or nonpayment of admitted
liability under subsection
(c)(1)(A)
on the amount so paid shall not
accrue for the period after the date of the Notice and Demand
(UPIA Section
3-3(b-10)(1)).
EXAMPLE 1: Individual's income
tax return for calendar year 2000 was due (without regard to extensions) by
April 15, 2001, 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 2000 and January 15 of 2001, but made only the
first payment of $337.50 in a timely manner. Individual filed the return on
April 15, 2001 and paid the remaining $1,162.50 liability with the return.
Individual owes a penalty for late payment of estimated tax of $118.14. Because
all payments, other than the first estimated tax installment, were made on
April 15, the second and third installment payments were made more than 180
days late, and the fourth installment payment was made 90 days late. The late
payment of estimated tax penalty is calculated as follows: second installment
penalty ($337.50 x 15% = $50.63) + third installment penalty ($337.50 x 15% =
$50.63) + fourth installment penalty ($337.50 x 5% = $16.88) = $118.14 late
payment penalty for failure to pay estimated taxes.
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, 2001, 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 penalties for late payment
of estimated tax and late payment of tax due with the return totaling $166.89.
Because all the estimated tax installments, other than the first, were made on
October 1, the second, third and fourth installment payments were made more
than 180 days late. The remaining $150 was due on April 15 and was paid more
than 90 but not more than 180 days late. The late payment of estimated tax penalty
is calculated as follows for each of the 3 late estimated tax installments:
$337.50 x 15% = $50.63, times 3 = $151.89 late payment penalty for failure to
pay estimated taxes. The penalty for late payment of the tax due with the
return is calculated as follows: $1,500 - $1,350 (the amount of estimated taxes
due) = $150 tax due with the return and paid late. $150 x 10% = $15 late
payment penalty for failure to pay tax due by April 15.
EXAMPLE 3: Taxpayer's Form ST-1
for May 2001 was due on June 20, 2001. Taxpayer's quarter-monthly accelerated
tax payments of the Retailers' Occupation Tax were due on May 7, 15, 22 and 31.
The amount of each accelerated payment due was $4,500. Taxpayer did not make
any accelerated payments and instead paid the total tax due with its timely
filed return on June 20. Taxpayer is subject to penalty for failing to make
timely accelerated tax payments. The May 7 and May 15 payments were more than
30 days but less than 90 days late, and are therefore subject to the 5%
penalty. The May 22 and May 31 payments were no more than 30 days late, and are
therefore subject to the 2% penalty. The late payment penalty is $630: the
$4,500 due on May 7 x 5%, or $225; the $4,500 due on May 15 x 5%, or $225; the
$4,500 due on May 22 x 2%, or $90; plus the $4,500 due on May 31 x 2%, or $90.
If the amount of each accelerated payment due is subsequently increased or
decreased as the result of an audit or amendment to the return, the penalty
under this subsection (c)(1)(B) is computed using the corrected amount.
EXAMPLE 4: Taxpayer's Form ST-1
for July, 2002, due on August 20, 2002, was timely filed but no payment was
made. The Department issued Taxpayer a Notice and Demand dated September 15,
2002. Taxpayer paid the tax due on October 9, 2002. The penalty is 2% of the
tax shown due on the return. Although payment was made later than 30 days after
the due date, a Notice and Demand was issued on September 15, and the penalty
does not increase for the period after the date of a Notice and Demand when the
tax is paid within 30 days after the Notice and Demand is issued.
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 a 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. The amount of penalty imposed is 20% of
any amount that is not paid within the 30-day period. In the case of a notice of
tax liability that becomes a Final Assessment without a protest and hearing,
the penalty imposed under UPIA
Section 3-3(b-10)(2) shall be imposed at
the expiration of the period provided for the filing of a protest.
(UPIA
Section 3-3(b-10)(2))
EXAMPLE 1: Corporation timely
filed its Form IL-1120 for calendar year 2000 by the March 15, 2001 unextended
due date. Corporation properly made all estimated tax payments and paid the
remainder of its reported tax liability with the return. In 2003, the
Department completed an audit of Corporation's 2000 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 $1,000 (20% 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 for
2000 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 (c)(1) and is subject to the late payment penalty under subsection
(c)(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 deadline, it is immediately subject to late payment penalty under
subsection (c)(1).
3) For
purposes of this subsection (c), 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-10)(2)
with (b-20)(2).)
d) Late
Payment Penalty for Returns Due (without regard to extensions) On or After January
1, 2004 and On or Before December 31, 2004. For returns due on or after January
1, 2004, and on or before December 31, 2004, UPIA Section 3-3(b-15) imposes a
penalty for failure to pay the tax shown due on a return, or the tax required
to be shown due on a return, including tax shown on an amended return, on or
before the due date prescribed for payment of the tax, or imposes a penalty for
an amount of underpayment of estimated tax.
1) The
amount of the penalty imposed is determined according to the following
schedule:
A)
2%
of the amount paid not later than 30 days after the due date prescribed for
payment of the tax;
B)
10%
of the amount paid later than 30 days after the due date, but not later than 90
days after the due date prescribed for payment of the tax;
C)
15%
of the amount paid later than 90 days after the due date, but not later than
180 days after the due date prescribed for payment of the tax; and
D)
20%
of any amount that is paid later than 180 days after the due date prescribed
for payment of the tax.
2) Notwithstanding
subsection (d)(1),
if an amount of tax is paid no later than 30 days after
the date of a Notice and Demand issued with respect to that tax, the penalty
imposed under this subsection (d) with respect to the amount so paid shall not
increase over the penalty applicable as of the date of the Notice and Demand.
(UPIA Section 3-3(b-15))
3) For
purposes of this subsection (d), 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-15)(2)
with (b-20)(2).)
4) No
penalty is imposed under this subsection (d) for failure to timely pay the tax
shown due on an amended federal change return timely filed pursuant to IITA
Section 506(b), but only to the extent the failure relates to the federal
change reported under that Section.
5) The
provisions of this subsection (d) may be illustrated by the following examples:
EXAMPLE 1: Individual's income
tax return for calendar year 2003 was due (without regard to extensions) by
April 15, 2004, 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 2003 and January 15 of 2004, but made only the
first payment of $337.50 in a timely manner. Individual filed the return on
April 15, 2004, and paid the remaining $1,162.50 liability with the return.
Individual owes a penalty for late payment of estimated tax of $185.63. Because
all payments other than the first estimated tax installment were made on April
15, the second and third installment payments were made more than 180 days
late, and the fourth installment payment was made 91 days late. The late
payment of estimated tax penalty is calculated as follows: second installment
penalty ($337.50 x 20% = $67.50) + third installment penalty ($337.50 x 20% =
$67.50) + fourth quarter penalty ($337.50 x 15% = $50.63) = $185.63 late
payment penalty for failure to pay estimated taxes.
EXAMPLE 2: Same facts as in
Example 1 except that the return was filed on October 1, 2004, 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, 2001 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. The penalty owed by Individual
for late payment of estimated tax and late payment of tax due with the return
is $225. Because all the estimated tax installments, other than the first, were
made on October 1, the second, third and fourth installment payments were made
more than 180 days late. The remaining $150 was due on April 15 and was paid
more than 90 but not more than 180 days late. The late payment of estimated tax
penalty is calculated as follows for each of the 3 late estimated tax
installments: $337.50 x 20% = $67.50, times 3 = $202.50 late payment penalty
for failure to pay estimated taxes. The penalty for late payment of the tax due
with the return is calculated as follows: $1,500 - $1,350 (the amount of
estimated taxes due) = $150 tax due with the return and paid late. $150 x 15% =
$22.50 late payment penalty for failure to pay tax due by April 15.
EXAMPLE 3: Taxpayer's Form ST-1
for May 2004 was due June 20, 2004. Taxpayer's quarter-monthly accelerated tax
payments of the Retailers' Occupation Tax were due on May 7, 15, 22 and 31. The
amount of each accelerated payment due was $4,500. Taxpayer did not make any
accelerated payments and instead paid the total tax due with its timely filed
return on June 20. Taxpayer is subject to penalty for failing to make timely
accelerated tax payments. The May 7 and May 15 payments were made later than 30
days after the due date, but not later than 90 days after the due date. The May
22 and May 31 payments were made not later than 30 days after the due date. The
late payment penalty is $1,080: the $4,500 due on May 7 times 10%, or $450; the
$4,500 due on May 15 times 10%, or $450; the $4,500 due on May 22 times 2%, or
$90; plus the $4,500 due on May 31 times 2%, or $90. If the amount of each
accelerated payment due is subsequently increased or decreased as the result of
an audit or amendment to the return, the penalty under this subsection (d) is
computed using the corrected amount.
EXAMPLE 4: Taxpayer's Form ST-1
for July 2004, due on August 20, 2004, was timely filed. No accelerated
payments were due and none was made, and no payment was made with the return.
The Department issued Taxpayer a Notice and Demand dated September 15, 2004. Taxpayer
paid the tax due on October 9, 2004. The penalty is 2% of the tax shown due on
the return. Although payment was made later than 30 days after the due date, a
Notice and Demand was issued on September 15, and the penalty does not increase
for the period after the date of a Notice and Demand when the tax is paid
within 30 days after the Notice and Demand is issued.
e) Late
Payment Penalty for Returns Due (without regard to extensions) On or After
January 1, 2005 and before January 1, 2024. For returns due on or after January
1, 2005 and before January 1, 2024, UPIA Section 3-3(b-20) imposes underpayment
penalties as follows:
1) Failure
to Make Accelerated Tax Payments. UPIA Section 3-3(b-20)(1) imposes a penalty
for
failure to pay, prior to the due date for payment, any amount of tax the
payment of which is required to be made prior to the filing of a return or
without a return (penalty for late payment or nonpayment of estimated or
accelerated tax).
The penalty is imposed at the rate of:
A)
2%
of any amount that is paid no later than 30 days after the due date; and
B)
10%
of any amount that is paid later than 30 days after the due date.
(UPIA
Section 3-3(b-20)(1))
2) Failure
to Pay Tax. UPIA Section 3-3(b-20)(2) imposes a penalty
for failure to pay
the tax shown due or required to be shown due on a return on or before the due
date prescribed for payment of that tax or an amount that is reported in an
amended return (penalty for late payment or nonpayment of tax).
The penalty
is imposed at the rate of:
A)
2%
of any amount that is paid no later than 30 days after the due date;
B)
10%
of any amount that is paid later than 30 days after the due date and prior to
the date the Department has initiated an audit or investigation of the
taxpayer; and
C)
20%
of any amount that is paid after the date the Department has initiated an audit
or investigation of the taxpayer.
(UPIA Section 3-3(b-20)(2))
i) The
rate imposed under this subsection (e)(2)(C)
shall be reduced to 15% if the
entire amount due on an amended return (following completion of an occupation,
use or excise tax audit) or a form for waiver of restrictions on assessment
(following completion of an income tax audit) is paid not later than 30 days
after the Department has provided the taxpayer with the amended return or form
for waiver of restrictions
. (UPIA Section 3-3(b-20)(2)) For purposes of
this subsection (e)(2)(C), the "entire amount due" on an amended
return or waiver of restrictions on assessment means the tax, including any
reduction in vendor's discount resulting from late payment of taxes, but does
not include any interest, penalty or excess sales tax collected from customers
and not refunded.
ii)
The
reduction of the rate to 15% shall be rescinded if the taxpayer makes any claim
for refund or credit of the tax liability, penalties or interest determined to
be due upon audit,
except in the case of a claim based on a carryover of a
loss or credit, the availability of which was not determined in the audit.
(UPIA Section 3-3(b-20)(2)) The rescission of the 15% rate applies only to the
amount of the refund or credit that is claimed and that is finally disallowed.
3) Special
Provisions. For purposes of imposing the penalty under subsection (e)(2):
A)
Any
overpayment reported on an original return that has been allowed as a refund or
credit to the taxpayer shall be deemed to have not been paid on or before the
due date for payment.
(UPIA Section 3-3(b-20)(2)) However, 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 amended return.
B) Federal
Change Returns Filed Under IITA Section 506(b)
i) The
penalty under subsection (e)(2) is not imposed on an amount shown due on an
amended federal change return timely filed pursuant to IITA Section 506(b), but
only to the extent that amount results from the federal change being timely
reported.
ii) The
filing of a claim for refund pursuant to IITA Section 506(b) does not cause the
reduction of the penalty rate to 15% to be rescinded pursuant to subsection
(e)(2)(C)(ii)
.
C) Protest
Act Payments.
Any amount paid under protest pursuant to the provisions of
the State Officers and Employees Money Disposition Act
(Protest Act) [30
ILCS 230]
shall be deemed to have been paid after the Department has
initiated an audit and more than 30 days after the Department has provided the
taxpayer with an amended return (following completion of an occupation, use or
excise tax audit) or a form for waiver of restrictions on assessment (following
completion of an income tax audit).
(UPIA Section 3-3(b-20)(2)) Subsection
(e)(2)(C) applies only to payments that are not timely. A payment made under
the Protest Act on or before the date the payment was due is not deemed to have
been paid late.
D) Initiation
of an Audit or Investigation. For purposes of subsection
(e)(2)(C)
:
i) An
"audit" refers to actions taken by the Audit Bureau of the
Department.
ii) An
"investigation" refers to actions taken by the Bureau of Criminal
Investigation of the Department.
iii) An
audit or investigation is initiated on the date a representative of the
Department first contacts the taxpayer, whether by telephone, mail, email or
otherwise, informing the taxpayer that the Department is reviewing the
taxpayer's return, failure to file a return, or identified transactions for the
period at issue.
iv) An
audit or investigation is not initiated by a communication regarding a
mathematical error or suspected mathematical error on the taxpayer's original
or amended return, or regarding the failure of the taxpayer to sign or include
all necessary attachments to an original or amended return that has been filed.
v) The
Department has the burden of providing evidence that an audit or investigation
of a tax period was initiated prior to the date a specific payment of tax for
that period was made.
vi) The
initiation of an income tax audit or investigation of a partnership, Subchapter
S corporation, trust or estate also serves as the initiation of an income tax
audit or investigation of the partners, shareholders or beneficiaries, but only
with respect to any income tax liability arising from those entities' interest
in the partnership, Subchapter S corporation, trust or estate.
E) Provision
of a Waiver of Restrictions on Assessment or Amended Return After Completion of
an Audit or Investigation. For purposes of subsection
(e)(2)(C)
:
i) A
waiver of restrictions on assessment or an amended return is presented to the
taxpayer when mailed or, if delivered by another means, when received by the
taxpayer or by an authorized representative of the taxpayer.
ii) If a
taxpayer is entitled to request review of an audit by the Informal Conference
Board, the audit is not completed until a waiver of restrictions on assessment
or an amended return is presented to the taxpayer on a date that is after the
date on which:
• the
Informal Conference Board issues its final Action Decision to the taxpayer: or
• if
the taxpayer fails to request review, the taxpayer's right to request review by
the Informal Conference Board expires.
F) IITA
Section 704A(c)(1), (2) and (3) provide that payments of income taxes withheld
by an employer from employee compensation are due before the return reporting the
withholding is due. However, IITA Section 704A(c)(4) provides that payment of any
tax that was withheld or required to be withheld during the period for which
the return is due, and that had not previously been paid to the Department, was
due on the due date of the return
.
Accordingly, any amount of
withholding that is not paid by the due date of the return is subject to
penalty under subsection (e)(2).
4)
The
penalty imposed under subsection (e)(2) shall be deemed assessed at the time
the tax upon which the penalty is computed is assessed, except that, if the
reduction of the penalty rate to 15% is rescinded under subsection
(e)(2)(C)(ii)
because a claim for refund or credit
has been filed, the increase in penalty shall be deemed assessed at the time
the claim for refund or credit is filed.
(UPIA Section 3-3(b-20)(3))
5) The
provisions of this subsection (e) may be illustrated by the following additional
examples.
EXAMPLE 1: Individual's income
tax return for calendar year 2004 was due (without regard to extensions) by
April 15, 2005, 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 2004 and January 15 of 2005, but made only the
first payment of $337.50 in a timely manner. Individual filed the return on
April 15, 2005 and paid the remaining $1,162.50 liability with the return.
Individual owes penalties for late payment of estimated tax and late payment of
tax due with the return of $101.25. Because all payments, other than the first
estimated tax installment, were made on April 15, the second, third and fourth
installment payments were made more than 30 days late. The late payment of
estimated tax penalty is calculated as follows: 3 late installments each incur
a penalty of $337.50 x 10% = $33.75, times 3 = $101.25 late payment penalty for
failure to pay estimated taxes.
EXAMPLE 2: Same facts as in
Example 1 except that the return was filed on October 1, 2005, 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, 2005, 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 the same
$101.25 penalty for late payment of estimated tax, and the late payment of tax
due with the return is $15. The penalty for late payment of the tax due with
the return is calculated as follows: $1,500 - $1,350 (the amount of estimated
taxes due) = $150 tax due with the return and paid late. The payment was made
more than 30 days late, but before the Department had initiated an audit or
investigation, so the penalty is $150 x 10% = $15 for failure to pay tax due by
April 15.
EXAMPLE 3: Taxpayer, a
corporation, is a calendar year taxpayer. For its 2004 taxable year, Taxpayer
made timely installment payments of estimated tax of $50,000 each quarter. On
March 15, 2005, Taxpayer filed its calendar 2004 Illinois income tax return,
showing total tax imposed of $180,000 (net of Article 2 credits). Taxpayer's
return requested that the $20,000 overpayment be applied against its estimated
tax payment obligation for 2005. After an audit by the Department in 2006, it
was determined that the taxpayer owed additional tax of $120,000, or a total of
$300,000. Taxpayer is not subject to penalty under this subsection (e) for
failure to make timely payment of estimated taxes because each of its timely
payments exceeded 25% of the $180,000 tax shown due on its return. Taxpayer is
subject to penalty under this subsection (e) for failure to timely pay the tax
required to be shown due on the return. The amount that was paid late was the
$300,000 owed minus the $180,000 liability shown on the original return, or
$120,000. The $20,000 overpayment shown on the original return was not timely
paid because it was credited against the taxpayer's 2005 estimated tax payment
obligation. Because the tax was paid after the initiation of an audit, the
penalty is $24,000 ($120,000 times 20%).
EXAMPLE 4: The facts are the same
as in Example 3 except that the additional $120,000 in tax due was paid within
30 days after the Department issued to Taxpayer, after completion of the audit,
a Form IL-870, Waiver of Restrictions, showing the $120,000 in additional tax
due. The penalty is $18,000 ($120,000 times 15%).
EXAMPLE 5: The facts are the same
as in Example 3 except that the additional $120,000 in tax due was reported by
Taxpayer on an amended return that was timely filed pursuant to IITA Section
506(b). Taxpayer is not subject to penalty for failure to timely pay the
additional tax because the tax was reported on a timely-filed federal change
return.
EXAMPLE 6: Taxpayer's Form ST-1
for May 2005 is due June 20, 2005. Taxpayer's quarter-monthly accelerated tax
payments of the Retailers' Occupation Tax were due on May 7, 15, 22 and 31. The
amount of each accelerated payment due was $4,500. Taxpayer did not make any accelerated
payments and instead paid the total tax due upon the timely filing of its
return on June 20. Taxpayer is subject to penalty under subsection (e)(1) for
failure to pay accelerated payments of the tax shown on the return on or before
the due dates prescribed for payment. The May 7 and May 15 payments were made
later than 30 days after the due date. The May 22 and May 31 payments were made
not later than 30 days after the due date. Taxpayer's late payment penalty is
therefore $1,080: the $4,500 due on May 7 times 10%, or $450; the $4,500 due on
May 15 times 10%, or $450; the $4,500 due on May 22 times 2%, or $90; plus the
$4,500 due on May 31 times 2%, or $90. If the amount of each accelerated
payment due is subsequently increased or decreased as the result of an audit or
amendment to the return, the penalty under this subsection (e)(5) is computed
using the corrected amount.
EXAMPLE 7: Taxpayer's Form ST-1
for July 2005, due on August 20, 2005, was timely filed. No accelerated payments
were required or made, and no payment was made with the return. The Department
issued Taxpayer a Notice and Demand dated September 16. 2005, Taxpayer paid the
tax due on October 9, 2005. The penalty is 10% of the tax shown due on the
return because the payment was made more than 30 days after the August 20, 2005
due date for payment. Unlike the penalty imposed under subsection (d), the
penalty imposed under this subsection (e) may increase after a Notice and Demand
has been issued, even if the taxpayer pays the entire amount due before the date
for payment indicated in the Notice and Demand. The Notice and Demand is not
the initiation of an audit or an investigation, so the penalty under subsection
(e)(2)(C)
does not apply.
EXAMPLE 8: Upon completion of an
audit, the Department determines that Taxpayer has underpaid its 2005 income
tax liability by $10,000. At the request of Taxpayer, the Department presents
Taxpayer with a Form IL-870, Waiver of Restrictions, showing an underpayment of
$8,000 and a Notice of Deficiency for the remaining $2,000. Taxpayer
immediately signs the Form IL-870 and pays the $8,000 in tax shown due on that
form. Taxpayer files a protest of the Notice of Deficiency. After an
administrative hearing, the Department determines that the $2,000 shown on the
Notice of Deficiency was not due. The 15% penalty rate applies to the $8,000
deficiency conceded by Taxpayer, because it paid that entire deficiency within
30 days after receiving the Form IL-870.
EXAMPLE 9: If, in Example 8, it
is ultimately determined that Taxpayer owed $500 of the $2,000 deficiency it
protested, the 20% rate will apply only to the $500 liability that was not paid
within 30 days after the taxpayer received the Form IL-870.
EXAMPLE 10: After the audit in Example
8, the Department presents Taxpayer with a Form IL-870 showing the entire
underpayment of $10,000. Taxpayer immediately signs the Form IL-870 and pays
the tax due. Taxpayer subsequently files a refund claim for $2,000, of which
$1,500 is allowed. The 15% penalty rate will be rescinded only with respect to
the $500 refund claim that is disallowed, and not to the $8,000 for which no
refund was claimed or to the $1,500 for which the refund claim was allowed.
f) Late
Payment Penalty for Returns Due (without regard to extensions) On or After
January 1, 2024. For returns due on or after January 1, 2024, UPIA Section
3-3(b-25) imposes underpayment penalties as follows:
1) Failure
to Make Accelerated Tax Payments. UPIA Section 3-3(b-25)(1) imposes a penalty
for
failure to pay, prior to the due date for payment, any amount of tax the
payment of which is required to be made prior to the filing of a return or
without a return (penalty for late payment or nonpayment of estimated or
accelerated tax).
The penalty is imposed at the rate of:
A)
2%
of any amount that is paid no later than 30 days after the due date; and
B)
10%
of any amount that is paid later than 30 days after the due date.
(UPIA
Section 3-3(b-25)(1))
2) Failure
to Pay Tax. UPIA Section 3-3(b-25)(2) imposes a penalty
for failure to pay
the tax shown due or required to be shown due on a return on or before the due
date prescribed for payment of that tax or an amount that is reported in an
amended return (penalty for late payment or nonpayment of tax).
The penalty
is imposed at the rate of:
A)
2%
of any amount that is paid no later than 30 days after the due date;
B)
10%
of any amount that is paid later than 30 days after the due date and prior to
the date the Department has initiated an audit or investigation of the
taxpayer; and
C)
20%
of any amount that is paid after the date the Department has initiated an audit
or investigation of the taxpayer.
(UPIA Section 3-3(b-25)(2))
i) The
rate imposed under this subsection (f)(2)(C)
shall be reduced to 15% if the
entire amount due on an amended return (following completion of an occupation,
use or excise tax audit) or a form for waiver of restrictions on assessment
(following completion of an income tax audit) is paid not later than 30 days
after the Department has provided the taxpayer with the amended return or form
for waiver of restrictions
. (UPIA Section 3-3(b-25)(2)) For purposes of
this subsection (f)(2)(C), the "entire amount due" on an amended
return or waiver of restrictions on assessment means the tax, including any
reduction in vendor's discount resulting from late payment of taxes, but does
not include any interest, penalty or excess sales tax collected from customers
and not refunded.
ii)
The
reduction of the rate to 15% shall be rescinded if the taxpayer makes any claim
for refund or credit of the tax liability, penalties or interest determined to
be due upon audit,
except in the case of a claim based on a carryover of a
loss or credit, the availability of which was not determined in the audit.
(UPIA Section 3-3(b-25)(2)) The rescission of the 15% rate applies only to the
amount of the refund or credit that is claimed and that is finally disallowed.
3) Special
Provisions. For purposes of imposing the penalty under subsection (f)(2):
A)
Any
overpayment reported on an original return that has been allowed as a refund or
credit to the taxpayer shall be deemed to have not been paid on or before the
due date for payment.
(UPIA Section 3-3(b-25)(2)) However, 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 amended return.
B) Federal Change Returns
Filed Under IITA Section 506(b)
i) The
penalty under subsection (f)(2) is not imposed on an amount shown due on an
amended federal change return timely filed and paid pursuant to IITA Section
506(b), but only to the extent that amount results from the federal change
being timely reported.
ii) The
filing of a claim for refund pursuant to IITA Section 506(b) does not cause the
reduction of the penalty rate to 15% to be rescinded pursuant to subsection
(f)(2)(C)(ii).
C) Protest
Act Payments.
Any amount paid under protest pursuant to the provisions of
the State Officers and Employees Money Disposition Act
(Protest Act) [30
ILCS 230]
shall be deemed to have been paid after the Department has
initiated an audit and more than 30 days after the Department has provided the
taxpayer with an amended return (following completion of an occupation, use or
excise tax audit) or a form for waiver of restrictions on assessment (following
completion of an income tax audit).
(UPIA Section 3-3(b-25)(2)) Subsection
(f)(2)(C) applies only to payments that are not timely. A payment made under
the Protest Act on or before the date the payment was due is not deemed to have
been paid late.
D) Initiation
of an Audit or Investigation. For purposes of subsection (f)(2)(C):
i) An
"audit" refers to actions taken by the Audit Bureau of the
Department.
ii) An
"investigation" refers to actions taken by the Bureau of Criminal
Investigation of the Department.
iii) An
audit is initiated on the date an audit initiation letter is mailed to taxpayer,
informing the taxpayer that the Department is reviewing the taxpayer's return,
failure to file a return, or identified transactions for the period at issue. A
criminal investigation is initiated when a representative of the Department or
law enforcement schedules an interview with the taxpayer, issues a subpoena or
other demand for records, executes a search warrant, or otherwise notifies the
taxpayer of an investigation by the Department.
iv) An
audit or investigation is not initiated by a communication regarding a
mathematical error or suspected mathematical error on the taxpayer's original
or amended return, or regarding the failure of the taxpayer to sign or include
all necessary attachments to an original or amended return that has been filed.
v) The
Department has the burden of providing evidence that an audit or investigation
of a tax period was initiated prior to the date a specific payment of tax for
that period was made.
vi) The
initiation of an income tax audit or investigation of a partnership, Subchapter
S corporation, trust or estate also serves as the initiation of an income tax
audit or investigation of the partners, shareholders or beneficiaries, but only
with respect to any income tax liability arising from those entities' interest
in the partnership, Subchapter S corporation, trust or estate.
E) Provision
of a Waiver of Restrictions on Assessment or Amended Return After Completion of
an Audit or Investigation. For purposes of subsection (f)(2)(C):
i) A
waiver of restrictions on assessment or an amended return is presented to the
taxpayer when mailed or, if delivered by another means, when received by the
taxpayer or by an authorized representative of the taxpayer.
ii) If a
taxpayer is entitled to request review of an audit by the Informal Conference
Board, the audit is not completed until a waiver of restrictions on assessment
or an amended return is presented to the taxpayer on a date that is after the
date on which:
• the
Informal Conference Board issues its final Action Decision to the taxpayer: or
• if
the taxpayer fails to request review, the taxpayer's right to request review by
the Informal Conference Board expires.
F) IITA
Section 704A(c)(1), (2) and (3) provide that payments of income taxes withheld
by an employer from employee compensation are due before the return reporting
the withholding is due. However, IITA Section 704A(c)(4) provides that payment
of any tax that was withheld or required to be withheld during the period for
which the return is due, and that had not previously been paid to the
Department, was due on the due date of the return
.
Accordingly, any
amount of withholding that is not paid by the due date of the return is subject
to penalty under subsection (f)(2).
4)
The penalty imposed under
subsection (f)(2)
shall be deemed assessed at
the time the tax upon which the penalty is computed is assessed, except that,
if the reduction of the penalty rate to 15% is rescinded under
subsection
(f)(2)(C)(ii)
because a claim for refund or credit has been filed, the
increase in penalty shall be deemed assessed at the time the claim for refund
or credit is filed.
(UPIA Section 3-3(b-25)(3))
5) The
provisions of this subsection (f) may be illustrated by the following additional
examples.
EXAMPLE 1: Individual's income
tax return for calendar year 2023 is due (without regard to extensions) by
April 15, 2024, and the liability after credits was $1,500. Individual owes 4
estimated tax installment payments of $337.50 each, which are due on April 15,
June 15 and September 15 of 2023 and January 15 of 2024, but makes only the
first payment of $337.50 in a timely manner. Individual files the return on
April 15, 2024 and pays the remaining $1,162.50 liability with the return.
Individual owes penalties for late payment of estimated tax and late payment of
tax due with the return of $101.25. Because all payments, other than the first
estimated tax installment, are made on April 15, the second, third and fourth
installment payments are made more than 30 days late. The late payment of
estimated tax penalty is calculated as follows: 3 late installments each incur
a penalty of $337.50 x 10% = $33.75, times 3 = $101.25 late payment penalty for
failure to pay estimated taxes.
EXAMPLE 2: Same facts as in
Example 1 except that the return is filed on October 1, 2025, 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, 2025, 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 the same $101.25 penalty for
late payment of estimated tax, and the late payment of tax due with the return
is $15. The penalty for late payment of the tax due with the return is
calculated as follows: $1,500 - $1,350 (the amount of estimated taxes due) =
$150 tax due with the return and paid late. The payment was made more than 30
days late, but before the Department had initiated an audit or investigation,
so the penalty is $150 x 10% = $15 for failure to pay tax due by April 15.
EXAMPLE 3: Taxpayer, a corporation,
is a calendar year taxpayer. For its 2023 taxable year, Taxpayer makes timely
installment payments of estimated tax of $50,000 each quarter. On April 15,
2025, Taxpayer files its calendar 2023 Illinois income tax return, showing
total tax imposed of $180,000 (net of credits allowed under Article 2 of the
Illinois Income Tax Act). Taxpayer's return requests that the $20,000
overpayment be applied against its estimated tax payment obligation for 2024.
After an audit, the Department determines that Taxpayer owes additional tax of
$120,000, or a total of $300,000. Taxpayer is not subject to penalty under this
subsection (f) for failure to make timely payment of estimated taxes because
each of its timely payments exceeded 25% of the $180,000 tax shown due on its
return. Taxpayer is subject to penalty under this subsection (f) for failure to
timely pay the tax required to be shown due on the return. The amount that was
paid late was the $300,000 owed minus the $180,000 liability shown on the
original return, or $120,000. The $20,000 overpayment shown on the original
return was not timely paid because it was credited against Taxpayer's 2024
estimated tax payment obligation. Because the tax was paid after the initiation
of an audit, the penalty is $24,000 ($120,000 times 20%).
EXAMPLE 4: The facts are the same
as in Example 3 except that the additional $120,000 in tax due is paid within
30 days after the Department issues to Taxpayer, after completion of the audit,
a Form IL-870, Waiver of Restrictions, showing the $120,000 in additional tax
due. The penalty is $18,000 ($120,000 times 15%).
EXAMPLE 5: The facts are the same
as in Example 3 except that the additional $120,000 in tax due is reported by
Taxpayer on an amended return that was timely filed and paid pursuant to IITA
Section 506(b). Taxpayer is not subject to penalty for failure to timely pay
the additional tax because the tax was reported on a timely-filed federal
change return and paid on or before the due date.
EXAMPLE 6: Taxpayer's Form ST-1
for May 2024 is due June 20, 2024. Taxpayer's quarter-monthly accelerated tax
payments of the Retailers' Occupation Tax are due on May 7, 15, 22 and 31. The
amount of each accelerated payment due is $4,500. Taxpayer does not make any
accelerated payments and instead pays the total tax due upon the timely filing
of its return on June 20. Taxpayer is subject to penalty under subsection (f)(1)
for failure to pay accelerated payments of the tax shown on the return on or
before the due dates prescribed for payment. The May 7 and May 15 payments are
made later than 30 days after the due date. The May 22 and May 31 payments are
made not later than 30 days after the due date. Taxpayer's late payment penalty
is therefore $1,080: the $4,500 due on May 7 times 10%, or $450; the $4,500 due
on May 15 times 10%, or $450; the $4,500 due on May 22 times 2%, or $90; plus
the $4,500 due on May 31 times 2%, or $90. If the amount of each accelerated
payment due is subsequently increased or decreased as the result of an audit or
amendment to the return, the penalty under this subsection (f)(5) is computed
using the corrected amount.
EXAMPLE 7: Taxpayer's Form ST-1
for July 2024, due on August 20, 2024, is timely filed. No accelerated payments
are required or made, and no payment is made with the return. The Department
issues Taxpayer a Notice and Demand dated September 16. 2024, Taxpayer pays the
tax due on October 9, 2024. The penalty is 10% of the tax shown due on the
return because the payment is made more than 30 days after the August 20, 2024
due date for payment. Unlike the penalty imposed under subsection (d), the
penalty imposed under this subsection (f) may increase after a Notice and
Demand has been issued, even if the taxpayer pays the entire amount due before
the date for payment indicated in the Notice and Demand. The Notice and Demand
is not the initiation of an audit or an investigation, so the penalty under
subsection (f)(2)(C) does not apply.
EXAMPLE 8: Upon completion of an
audit, the Department determines that Taxpayer has underpaid its 2023 income
tax liability by $10,000. At the request of Taxpayer, the Department presents
Taxpayer with a Form IL-870, Waiver of Restrictions, showing an underpayment of
$8,000 and a Notice of Deficiency for the remaining $2,000. Taxpayer
immediately signs the Form IL-870 and pays the $8,000 in tax shown due on that
form. Taxpayer files a protest of the Notice of Deficiency. After an
administrative hearing, the Department determines that the $2,000 shown on the
Notice of Deficiency was not due. The 15% penalty rate applies to the $8,000
deficiency conceded by Taxpayer, because it paid that entire deficiency within
30 days after receiving the Form IL-870.
EXAMPLE 9: If, in Example 8, it
is ultimately determined that Taxpayer owed $500 of the $2,000 deficiency it
protested, the 20% rate will apply only to the $500 liability that was not paid
within 30 days after the taxpayer received the Form IL-870.
EXAMPLE 10: After the audit in
Example 8, the Department presents Taxpayer with a Form IL-870 showing the
entire underpayment of $10,000. Taxpayer immediately signs the Form IL-870 and
pays the tax due. Taxpayer subsequently files a refund claim for $2,000, of
which $1,500 is allowed. The 15% penalty rate will be rescinded only with
respect to the $500 refund claim that is disallowed, and not to the $8,000 for
which no refund was claimed or to the $1,500 for which the refund claim was
allowed.
g) Unless
a specific provision of the UPIA or a tax Act provides otherwise:
1)
For
purposes of the late payment penalties imposed under this Section, the basis of
the penalty shall be the tax shown or required to be shown on the return,
whichever is applicable, reduced by any part of the tax that is paid on time
and by any credit that was properly allowable on the date the return was due.
(UPIA Section 3-3(c))
2) For
purposes of this Section, the maximum amount of Manufacturer's Purchase Credit
that is allowable on the date a return is due for a tax period is the amount
actually claimed on a timely-filed return for that tax period.
3) If a
penalty is imposed on the basis of the tax required to be shown on a return,
the
penalty shall be applied to the tax required to be shown even if that
amount is less than the tax shown on the return.
(UPIA Section 3-3(d))
EXAMPLE 1: A renter of automobiles
for periods of one year or less has tax due under the Automobile Renting
Occupation and Use Tax for the rental receipts received during the month of
June 1994 on July 20, 1994. The tax shown on the return filed on July 20, 1994
is $500, but the taxpayer remits no payment of the tax when the return is
filed. On August 1, 1994 the taxpayer files an amended return reducing its tax
liability to $400 and also remits $400. Assuming that the $400 amount shown on
the amended return is correct, the taxpayer owes a late payment penalty on the $400
amount required to be shown on the original return, not the $500 amount that
was shown on the original return.
EXAMPLE 2: The penalty for
failure to make timely payments of estimated tax under IITA Section 804 is imposed
on the
required installment,
which is defined in IITA Section
804(c)(1)(A) as 25% of the
required annual payment,
which is defined in
IITA Section 804(c)(1)(B)(i) as
90% of the tax shown on the return for the
taxable year, or if no return is filed, 90% of the tax for that year.
Accordingly,
if a return is filed for a taxable year, and the alternative computations of
the required annual payment under IITA Section 804(c)(1)(B)(ii) and (iii) do
not apply, any penalty for failure to make timely payments of estimated taxes
will be computed on the basis of the tax shown on the original return,
regardless of whether the tax required to be shown is greater or less than the
tax shown.
h)
If
both a penalty under subsection (a)(1) or (b)(1) and a penalty under subsection
(a)(2) or (b)(2) are assessed against the same return, the penalty imposed
under subsection (a)(2) or (b)(2) shall be assessed against only the additional
tax found to be due.
(UPIA Section 3-3(e))
If both a penalty under
subsection (c)(1) and a penalty under subsection (c)(2) are assessed against
the same return, the penalty under subsection (c)(2) shall be assessed against
only the additional tax found to be due.
(UPIA Section 3-3(e-5))
EXAMPLE 1: An employer has
withholding tax due for the third quarter of 1994. The return is filed timely,
reporting tax withheld of $2,000, but timely payments total only $1,500,
leaving a tax balance due of $500. The late payment penalty under subsection
(a)(1) equal to $75 (15% of the $500 underpayment) is assessed. The employer
does not pay the additional liability within 30 days after Notice and Demand
for Payment. Although the total tax that was not paid on time was $1,200, the
penalty under subsection (a)(2) is imposed only on the $700 additional tax due,
and not the $500 underpayment on which the penalty under subsection (a)(1) was
imposed.
EXAMPLE 2: Corporation timely
files its income tax return for calendar year 2000 on March 15, 2001 showing
total tax due of $30,000. Corporation timely made $27,000 in estimated tax
payments, but failed to pay the $3,000 tax balance due with the return.
Corporation pays the $3,000 tax due on June 15, 2001, later than 90 days but
not later than 180 days after the due date. The penalty for late payment of tax
due under subsection (c)(1) is $300 ($3,000 x 10%). In 2003, the Department
completes an audit of Corporation's 2000 return, increasing the tax due to
$36,000. Corporation agrees to the audit finding but does not pay the
additional liability until 45 days after Notice and Demand is issued.
Corporation is assessed an additional late payment penalty under subsection
(c)(2) of $1,200 (the $6,000 in additional tax due x 20%).
i)
If
the taxpayer has failed to file a return, and the Department determines the
correct amount of tax according to its best judgment and information, that
amount shall be prima facie evidence of the correctness of the tax due.
(UPIA Section 3-3(f))
j)
The
time within which to file a return or pay an amount of tax due without
imposition of a penalty does not extend the time within which to file a protest
to a Notice of Tax Liability or a Notice of Deficiency.
(UPIA Section
3-3(g))