Tax Tip #18 for Tax Professionals - Understanding individual income tax penalties and interest rates

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The Minnesota Department of Revenue may assess individuals the following penalties. It’s important for you to understand these penalties and when we may impose them.

Type of Penalty

Description of Penalty

Late Filing

Assessed on any unpaid balance when your client files a Minnesota income tax return more than six months after the due date. There is no penalty for filing late for a refund except in the case of an Extended Delinquency penalty.

Late Payment

Assessed on the unpaid balance when your client pays income tax after the due date.

Extended Delinquency for Missing Returns

Assessed when we send your client a Request for Missing Return letter and they fail to respond within the time allowed on the letter (normally 30 days).

Late Payment for Tax Assessments

Assessed when we send your client a Notice of Change letter and they fail to pay any tax owed within 30 days of the assessment date (or 30 days after resolution of an appeal).

Intentionally file a false or

fraudulent return to claim a refundable credit

Assessed when your client fraudulently claims a refundable credit.

Underpayment of Estimated Tax

May be assessed if your client’s tax liability is more than $500 after subtracting Minnesota withholding and refundable credits. The penalty may also apply if your client did not make Minnesota estimated tax payments on time.  

 

For more information on these penalties, see our Penalties and Interest for Individual Income Tax page.

Interest Rate

We charge interest on tax and penalty from the time a debt is past due until it is paid in full. Interest rates may change annually. The interest rate for 2019 is 5%.

Worksheet to Determine Penalty and Interest

If your clients file or pay after the due date, calculate the penalties and interest they will owe. To do this, complete the “Worksheet to Determine Penalty and Interest” on page 18 of the instructions for 2018 Form M1, Individual Income Tax. If you do not complete the worksheet, we will add the amount of interest and penalty to your clients’ amount owed.

For more information, see our Penalties and Interest page.