Or. Admin. R. 150-314-0195

Current through Register Vol. 63, No. 6, June 1, 2024

Section 150-314-0195 - Delinquency Penalty

(1) Although ORS 314.400(1) refers to a delinquency penalty for (A) failure to file a report or return by the due date or (B) failure to pay a tax due by the due date, only one five-percent penalty is added, even though there is a failure as to both requirements.

Example 1: Joe did not obtain an extension to file his tax return, which was due on April 15. On July 1, he filed the return and paid $2,000 of tax plus interest of $40. Joe will be charged a penalty of $100 ($2,000 x 5 percent).

(2)

(a) The delinquency penalty is based on the tax required to be shown on the return, reduced by credits claimed on the return and by any amount of the tax that is paid on or before the due date for payment. If the department determines that the tax shown on the return is greater than the tax required to be shown, the lesser amount is used to determine the penalty.

Example 2: Jeanette filed her tax return on time. The tax shown on the return was $800. Jeanette claimed credits of $150, withholding of $150, and showed a balance due of $500. She did not pay the $500 with the filing of the return. The department determined in processing the return that the tax required to be shown on the return was $600. The delinquency penalty of $15 is based on five percent of $300 ($600 tax required to be shown on the return, less credits of $150 and withholding of $150).

(b) The 20-percent penalty is in addition to the five-percent penalty. A 20-percent penalty is charged when:

(A) A tax return that is required to be filed annually or for a one-year period is not filed within three months of the due date (determined with regard to any extension of time to file granted to the taxpayer); or

(B) A tax return that is required to be filed more frequently than annually is not filed within one month of the due date (determined with regard to extensions).

Example 3: Pierre did not request an extension to file his return, which was due on April 15. He filed the return on November 1, showing tax of $900, credits of $300, and withholding of $200. Pierre sent a check for the balance due of $400 with the tax return. A total penalty of $100 will be charged; $20 for failure to pay the tax when due ($400 x 5 percent), and $80 for failing to file the return within three months of the due date ($400 x 20 percent).

Example 4: Same facts as Example 3, except Pierre received an extension to file until October 15. Pierre will be charged a five-percent penalty for failure to pay the tax when due. The 20-percent penalty for failure to file the return will not be charged because Pierre filed the return within three months of the extended due date.

Example 5: French Bakery did not file its Oregon Quarterly Tax Report for 1st quarter 2008 withholding, which was due on April 30, 2008. It filed the return on July 1, 2008, showing tax of $800 and prepayments of $500. French Bakery sent a check for the balance due of $300 with the tax return. A total penalty of $75 will be charged; $15 for failure to pay the tax when due ($300 x five percent), and $60 for failing to file the return within one month of the due date ($300 x 20 percent).

(c) If a taxpayer is required to file a federal income tax return for a period of less than 12 months under section 443 of the Internal Revenue Code, the Oregon personal income or corporate excise or income tax return required to be filed for that period is considered an annual filing thus subject to the additional 20-percent penalty.

(d) If a return or report is required to be filed on a one-time basis such as with inheritance returns, the return or report is considered an annual filing thus subject to the 20-percent penalty.

(e) If a taxpayer fails to file a return and the department must determine and assess the amount of tax, the penalties are based on the tax required to be shown on the return. The tax required to be shown on the return is reduced by any credits that may be lawfully claimed on the return and by any amount of the tax that is paid on or before the due date for payment.

Example 6: Isabelle filed her 2005 tax return on July 1, 2007. The tax shown on the return was $800 and Isabelle claimed credits of $300 and withholding of $400. She paid the balance due of $100 when she filed the return. Isabelle will be charged a five-percent failure-to-pay penalty, plus a 20 percent penalty for filing the return more than three months after the due date. The total penalty of $25 is based on $100 ($800 tax shown on the return less credits of $300 and withholding of $400).

Example 7: Same facts as Example 6, except that Isabelle did not file her 2005 tax return after being requested to do so by the department. The department determined that the tax required to be shown on the return was $900, allowable credits were $150 and withholding was $400. The penalty will be based on $350.

(3) Exceptions to the penalty for failure to pay tax when due, pursuant to the authority provided by 305.229.

(a) Payment of 90 percent of the tax determined, after withholdings and credits are subtracted from the tax otherwise due, as shown on the return. Income and excise tax returns filed within the period of an extension granted are not considered delinquent with regard to the time of filing. However, an extension of time to file a return does not extend the time for paying the tax. Thus, if the tax is not paid by the original due date of the return, a delinquency penalty of five percent is added to the total unpaid tax unless the taxpayer has met all of the following conditions:

(A) Filed for a federal automatic extension of time to file or filed for a separate Oregon extension, in accordance with current Oregon tax return instructions;

(B) At least 90 percent of the tax after credits as shown on the return was paid on or before the original due date of the return;

(C) The taxpayer's return is filed timely within the extension period;

(D) The balance of the tax as shown on the return is paid when the return is filed and any interest due is either paid when the return is filed or within 30 days of billing by the department.

Example 8: Henry filed an extension request with Oregon on April 15, along with a payment of $600. He filed his tax return on October 15. The tax shown on the return was $1,200 and Henry claimed total tax credits on the return of $200. Henry paid the balance due of $400 with the return. A five-percent penalty would be charged on the $400 paid on October 15 because Henry did not pay at least $900 (90 percent of the tax shown on the return {$1200}, less withholdings and credits {$200} or 90% of {$1200-$200}, which is $900), on or before the original due date of the return. Interest on the unpaid balance would be due from April 16 to October 15.

Example 9: Jan was granted an extension to file her federal tax return until October 15. She filed her Oregon return on June 14. The tax shown on the return was $2,500 and she had made estimated tax payments totaling $2,300. Jan paid the $200 tax due with the return. The five-percent penalty will not be charged on the $200 paid on June 14 if interest from April 16 to June 14 accompanies the $200 payment or if Jan pays the interest due on the unpaid balance of $200 within 30 days of billing by the department.

(b) Amended tax returns. If a taxpayer (individual or corporate) files an amended income or excise tax return accompanied by less than full payment of tax and interest, the department must send a billing notice indicating the amount of tax plus accrued interest to be paid. If the taxpayer pays the full amount of tax plus interest within 30 days of the date on the billing notice, the five-percent penalty for failure to pay the tax with the amended return will not apply.

Example 10: ABC Corporation filed an amended income tax return showing a balance of tax due of $1,000. A payment of $1,000 was submitted with the return. The $1,000 payment is first applied to interest that has accrued from the original due date of the return. The department determines that $200 of interest has accrued on the $1,000 of additional tax. Because the corporation has underpaid the tax by $200, ($1,000 payment less $200 applied to interest equals $800 of tax paid with the return), a five-percent penalty applies to the $200 of tax due. However, if ABC Corporation pays the $200 of tax plus any additional interest within 30 days of the date on the billing notice, the five-percent penalty will not apply.

(c) Deficiencies. If the department issues a Notice of Deficiency and the taxpayer pays the full amount of tax plus interest within 30 days of the date on the Notice of Deficiency, the five-percent penalty for failure to pay the tax required to be shown on the return will not apply. If the taxpayer pays only a portion of the tax plus interest, the five-percent penalty for failure to pay the tax required to be shown on the return will apply only to the unpaid portion of the tax.

Example 11: Hanna filed her original return timely but the department issued a Notice of Deficiency for $500 plus $75 interest. Hanna paid $300 within 30 days of the Notice of Deficiency. The five-percent penalty will apply to the unpaid deficiency ($$575 deficiency plus interest - $300 payment = $275 unpaid deficiency) because she did not pay the deficiency plus interest in full within 30 days of the Notice of Deficiency.

(d) Differences in the amount of prepaid tax. If a taxpayer (individual or corporate) files an income tax return or an excise tax return and the taxpayer overstates the amount of tax that was paid on or before the due date, the department must send a billing notice indicating the amount of additional tax and interest due. If the taxpayer pays the full amount of tax plus interest within 30 days of the date on the billing notice, the five-percent penalty for failure to pay the tax by the due date does not apply.

Example 12: Maria filed her individual income tax return on April 15. The tax shown on the return was $1,300. She claimed credits of $300 and state income tax withholding of $600. The $400 balance of tax due as shown on the return was paid with the return. During processing of the return, the correct amount of state income tax withholding is determined to be $350. Because Maria did not pay $250 of tax by the due date, a five-percent penalty applies. If Maria pays the additional tax due of $250 plus any additional interest within 30 days of the date on the department's notice, the five-percent penalty will not be charged.

Example 13: Same facts as Example 12, except Maria did not pay the $400 balance due when she filed the return. A penalty of $20 ($400 x 5 percent) is charged for failure to pay the $400 of tax when due. The $250 of additional tax resulting from the error in the amount of withholding will not have a five-percent penalty added if Maria pays the $250 of tax plus additional interest within 30 days of the department's notice.

(4) The penalties provided under ORS 305.265(13) and 314.400(6) are not combined. Only one 100 percent penalty may be assessed on a particular report or return.

Or. Admin. R. 150-314-0195

11-71; 12-19-75; TC 9-1981, f. 12-7-81, cert. ef. 12-31-81; RD 16-1982, f. 12-6-82, cert. ef. 12-31-82; RD 12-1985, f. 12-16-85, cert. ef. 12-31-85; RD 12-1985, f. 12-16-85, cert. ef. 12-31-85; RD 9-1987(Temp), f. & cert. ef. 7-8-87; RD 11-1987, f. & cert. ef. 11-1-87; RD 12-1990, f. 12-20-90, cert. ef. 12-31-90; RD 7-1993, f. 12-30-93, cert. ef. 12-31-93; RD 3-1995, f. 12-29-95, cert. ef. 12-31-95; REV 3-2006, f. & cert .ef. 7-31-06; REV 5-2008, f. 8-29-08; Runumbered from 150-314.400(1) by REV 9-2015, f. 12-23-15, cert. ef. 1-1-16; Renumbered from 150-314.400, REV 32-2016, f. 8-12-16, cert. ef. 9/1/2016

Stat. Auth.: ORS 305.100, 305.229

Stats. Implemented: ORS 314.400