Iowa Admin. Code r. 701-301.5

Current through Register Vol. 47, No. 11, December 11, 2024

Rule 701-301.5 - Payment of tax

(1)Payment of tax for wage earners. Withholding of tax on wage earners is required under Iowa Code section 422.16. See 701-Chapter 307.

(2)Payment of tax on income not subject to withholding. Those taxpayers with income not subject to withholding which will produce a tax liability of $200 or more shall file and pay a declaration of estimated tax. See 701-Chapter 308.

(3)Full estimated payment on original due date. When an extension is requested as provided by Iowa Code section 422.21, the total amount of estimated tax must be paid on or before the due date for filing the return.

(4)Balance of tax due. If the computation on the tax return shows additional tax due, it shall be paid in full with the filing of the return.

(5)Payment of tax by uncertified checks. The department will accept uncertified checks in payment of income taxes, provided the checks are collectible for their full amount without any deduction for exchange or other charges. The date on which the department receives the check will be considered the date of payment, so far as the taxpayer is concerned, unless the check is returned dishonored. If one check is remitted to cover two or more individuals' taxes, the remittance must be accompanied by a letter of transmittal stating:

(a) the name of the drawer of the check;

(b) the amount of the check;

(c) the amount of any cash, money order or other instrument included in the same remittance;

(d) the name of each individual whose tax is to be paid by the remittance; and

(e) the amount of payment on account of each individual.

(6)Procedure with respect to dishonored checks. If any check is returned unpaid, all expenses incidental to the collection thereof will be charged to the taxpayer. If any taxpayer whose check has been returned by the depository bank uncollected should fail at once to make that check good, the director will proceed to collect the tax as though no check has been given. A taxpayer who tenders a certified check in payment for taxes is not relieved from obligation until the check has been paid.

(7)Penalty and interest. In computing penalty and interest for failing to file a timely return or to pay the tax, refer to 701-Chapter 306.

(8) and (9) Reserved.

(10)Thirteen thousand five hundred dollar exemption. All taxpayers, except single taxpayers or taxpayers filing married filing separately, whose net income as computed under Iowa Code section 422.7, plus the amount of a lump-sum distribution for which the taxpayer has elected to be separately taxed for federal income tax purposes, the federal standard deduction or itemized deductions to the extent it does not exceed federal adjusted gross income, the personal exemption allowed for federal purposes, the qualified business income deduction allowed for federal purposes, and any net operating loss carryover is $13,500 or less are exempt from paying Iowa individual income tax subject to the following conditions:

a. In the case of married taxpayers, the incomes of both spouses are considered in order to determine if the taxpayers qualify for exemption from tax. However, in the case of married taxpayers where one spouse has a net operating loss and the taxpayers file separate Iowa returns, the taxpayers cannot receive the benefit of the exemption from tax if the spouse with the loss elects to carry back or carry forward that loss.

b. An individual claimed as a dependent on another person's return with an income of at least $5,000 but not more than $13,500 will be exempt from Iowa tax if:

(1) The person on whose return the dependent is claimed is filing as a single individual and has a net income of $9,000 or less, or

(2) The person on whose return the dependent is claimed and the person's spouse have a combined net income of $13,500 or less.

(3) The person on whose return the dependent is claimed is filing as a head of household or as a surviving spouse and has a net income of $13,500 or less.

c. If the payment of tax would reduce the net income to less than $13,500, the tax shall be reduced to an amount which would allow the taxpayer to retain a net income of $13,500. Example: If a taxpayer's net income was $13,600 and the computed tax after personal exemptions and other credits was $300, the payment of $300 would reduce the income below $13,500; therefore, the amount of tax is reduced to $100 so the taxpayer can retain a net income of $13,500.

(11)Nine thousand dollar exemption. Single taxpayers and taxpayers filing married filing separately whose net income as computed under Iowa Code section 422.7, plus the amount of a lump-sum distribution for which the taxpayer has elected to be separately taxed for federal income tax purposes, the federal standard deduction or itemized deductions to the extent it does not exceed federal adjusted gross income, the personal exemption allowed for federal purposes, the qualified business income deduction allowed for federal purposes, and any net operating loss carryover is $9,000 or less are exempt from paying Iowa individual income tax subject to the following conditions:

a. An individual claimed as a dependent on another person's return with an income of at least $5,000 but not more than $9,000 will be exempt from tax if:

(1) The person on whose return the dependent is claimed has a net income of $9,000 or less, or

(2) The person on whose return the dependent is claimed and the person's spouse have a combined net income of $13,500 or less.

(3) The person on whose return the dependent is claimed is filing as a head of household or as a surviving spouse and has a net income of $13,500 or less.

b. If the payment of tax would reduce the net income to less than $9,000, the tax is reduced to an amount which will allow the taxpayer to retain a net income of $9,000.

c. For taxpayers that file married filing separately, the combined net income of both spouses must be less than $13,500 for either of them to qualify for this exemption.

(13)Exemptions for taxpayers 65 years of age or older.

a. All taxpayers except single taxpayers or taxpayers filing married filing separately who are at least 65 years of age or older on December 31 of the tax year and whose net income as computed under Iowa Code section 422.7, plus the amount of a lump-sum distribution for which the taxpayer has elected to be separately taxed for federal income tax purposes, the federal standard deduction or itemized deductions to the extent it does not exceed federal adjusted gross income, the personal exemption allowed for federal purposes, the qualified business income deduction allowed for federal purposes, and any net operating loss carryover is $32,000 or less are exempt from paying Iowa individual income tax subject to the conditions set forth below:

(1) In the case of married taxpayers, the incomes of both spouses are considered in order to determine if the taxpayers qualify for exemption from tax. For purposes of this subrule, only one spouse is required to be 65 years of age or older by December 31 of the tax year. However, in the case of married taxpayers when one spouse has a net operating loss and the taxpayers file separate Iowa returns, the taxpayers cannot receive the benefit of the exemption from tax if the spouse with the loss elects to carry back or carry forward that loss.

(2) An individual claimed as a dependent on another person's return with an income of at least $5,000, but not more than $32,000, will be exempt from Iowa tax if:

1. The person on whose return the dependent is claimed is filing as a single individual and has a net income of $9,000 or less ($24,000 or less if the person is 65 years of age or older); or

2. The person on whose return the dependent is claimed and the person's spouse have a combined net income of $13,500 or less ($32,000 or less of the combined income of the person and the person's spouse if at least one spouse is 65 years of age or older); or

3. The person on whose return the dependent is claimed is filing as a head of household or as a surviving spouse and has a net income of $13,500 or less ($32,000 or less if the person is 65 years of age or older).

(3) If the payment of tax would reduce the net income to less than $32,000, the tax shall be reduced to an amount which would allow the taxpayer to retain a net income of $32,000.

EXAMPLE: If a taxpayer's net income was $32,100 and the computed tax after personal exemptions and other credits was $300, the payment of $300 would reduce the income below $32,000; therefore, the amount of tax is reduced to $100 in order for the taxpayer to retain a net income of $32,000.

b. Single taxpayers or taxpayers filing married filing separately whose net income, as computed under Iowa Code section 422.7, plus the amount of a lump-sum distribution for which the taxpayer has elected to be separately taxed for federal income tax purposes, the federal standard deduction or itemized deductions to the extent it does not exceed federal adjusted gross income, the personal exemption allowed for federal purposes, the qualified business income deduction allowed for federal purposes, and any net operating loss carryover is $24,000 or less are exempt from paying Iowa individual income tax subject to the conditions set forth in paragraphs "c,""d," and "e" below:

c. An individual claimed as a dependent on another person's return with an income of at least $5,000, but not more than $24,000, will be exempt from tax if:

(1) The person on whose return the dependent is claimed has a net income of $9,000 or less ($24,000 or less if the person is 65 years of age or older); or

(2) The person on whose return the dependent is claimed and the person's spouse have a combined net income of $13,500 or less ($32,000 or less of the combined income of the person and the person's spouse if at least one spouse is 65 years of age or older); or

(3) The person on whose return the dependent is claimed is filing as a head of household or as a surviving spouse and has a net income of $13,500 or less ($32,000 or less if the person is 65 years of age or older).

d. If the payment of tax would reduce the net income to less than $24,000, the tax is reduced to an amount which will allow the taxpayer to retain a net income of $24,000.

e. For taxpayers that file married filing separately, the combined net income of both spouses must be less than $32,000 for either of them to qualify for this exemption.

This rule is intended to implement Iowa Code section 422.5 as amended by 2006 Iowa Acts, Senate File 2408, and sections 422.16, 422.17, 422.21, 422.24, and 422.25.

Iowa Admin. Code r. 701-301.5

ARC 1303C, IAB 2/5/14, effective 3/12/14; Editorial change: IAC Supplement 11/2/22; Editorial change: IAC Supplement 10/18/23; ARC 7502C, IAB 1/10/24, effective 2/14/24