Uniform Civil Penalties
Uniform civil penalties, provided by
KRS 131.180, are applicable to unpaid tax liabilities unless otherwise provided by law. Multiple penalties may apply in certain situations.
Penalties That May Be Imposed
Late Filing - 2 percent of the total tax due for each 30 days or fraction thereof that a tax return or report is late. The maximum penalty is 20 percent of the total tax due. If the return is filed late after a jeopardy assessment has been issued, pursuant to KRS 131.150, the minimum penalty is $100, otherwise the minimum penalty is $10.00.
Late Payment and Failure to Withhold or Collect Tax as Required by Law - 2 percent of the total tax due for each 30 days or fraction thereof that a payment is late. The maximum penalty is 20 percent of the tax not timely withheld, collected or paid. The minimum penalty is $10.
Underpayment or Late Payment of Estimated Income Tax - 10 percent for failure to pay any installment of estimated income tax by the time prescribed by law. There is no maximum for this penalty. The minimum penalty is $25.
Failure to File or Failure to Furnish Information - 5 percent of the estimated tax due assessed by the Department of Revenue for each 30 days or fraction thereof that the return or report is not filed. The maximum penalty is 50 percent of the tax assessed. The minimum penalty is $100.
Failure to Timely Pay or Protest Tax by the Department of Revenue - 2 percent of the unpaid (due and payable) tax for each 30 days or fraction thereof for the failure or refusal to pay within 45 days of the due date any tax assessed by the Department of Revenue which is not appealed.
Failure to Timely Obtain a Required Tax Identification Number, Permit, License or Other Document of Authority - 10 percent of any cost or fee for the required identification number, permit, etc. There is no maximum for this penalty. The minimum penalty if $50.
Negligence - 10 percent of the tax assessed resulting from negligence. There is no maximum and no minimum for this penalty.
Fraud - 50 percent of the tax assessed resulting from the fraud. There is no maximum and no minimum for this penalty.
Unhonored (Cold) Check - 10 percent of the amount of the cold check. The maximum penalty is $100. The minimum penalty is $10.
Penalty Waiver for Reasonable Cause
The Department of Revenue may consider waiver of all or a portion of imposed penalties and/or cost of collection fee if the taxpayer can demonstrate reasonable cause.
The taxpayer must demonstrate that the tax liability was the result of circumstances beyond his or her control, that the taxpayer acted in a reasonable manner trying to timely pay the tax, or that the strict enforcement of penalties would cause the taxpayer undue financial hardship.
It is the responsibility of the taxpayer to supply the Department of Revenue with documentation to support the claim. The Department of Revenue officer assigned to the collection case can assist the taxpayer with the appropriate requirements.
Interest is statutory and, therefore, cannot be considered for waiver.
Cost of Collection Fee
As provided by KRS 131.440, a 25 percent Cost of Collection Fee may be added to the amount of unpaid tax due 45 days after the Original Notice Date. This fee is imposed in addition to the referenced penalties and is imposed to counteract the cost of collecting the liability. A 50 percent Cost of Collection Fee may be added to the amount of unpaid tax for failure to file a return for any previous tax period for which amnesty was available.
A 25 percent Assessment Fee may be added to audit liabilities assessed after the amnesty period, for periods ending prior to October 1, 2011.
Tax Interest Rates
KRS 131.183 mandates that the Commissioner of the Department of Revenue reviews the interest rate charged on tax liabilities, making any required changes.
Interest is computed on the unpaid tax due and there is no protest for imposed interest.
Under the referenced statute, the Department of Revenue has established the following rates, per year: