When does Kansas waive the 50% income tax penalty on additional tax from an adjusted return?

Plain-English summary

Kansas Notice 14-08 (July 1, 2014) explains a taxpayer-friendly change to the 50% income tax penalty.

The change. 2014 House Bill 2643 (Section 18) amended K.S.A. 79-3228(d) for tax years ending after December 31, 2013. The amendment addresses the situation where a taxpayer timely filed a return and paid the tax due, and the Department later adjusts that return and assesses additional tax.

• In that case, no 50% penalty is imposed under subsection (d) if the taxpayer pays the additional tax within 30 days of the notice of liability.
• If the additional tax is not paid within 30 days of the original notice, the penalty applies -- 50% of the unpaid balance of tax due, plus interest at the K.S.A. 79-2968(a) rate.

The general rule remains that a taxpayer who fails to file, or files an incorrect or insufficient return and does not file a proper return within 20 days of the director's notice, is subject to the 50% penalty and interest. The change is effective for tax year 2014 and subsequent years.

What this means for you

Taxpayers whose returns get adjusted

• If you filed on time and paid what your return showed, and Kansas later assesses more tax, you can avoid the 50% penalty by paying the additional amount within 30 days of the notice of liability.

Tax preparers

• Advise clients to pay a post-adjustment assessment promptly (within 30 days) to preserve the penalty waiver.

Common questions

Who qualifies for the penalty waiver? A taxpayer who timely filed and paid the tax shown, then is later adjusted.

What is the deadline to avoid the penalty? Payment within 30 days of the notice of liability.

What is the penalty if you miss the deadline? 50% of the unpaid balance of tax due, plus interest.

When did it take effect? Tax years ending after December 31, 2013 (tax year 2014 forward).

Citations and references

• K.S.A. 79-3228(d) -- the income tax penalty provision, amended by Section 18 of 2014 House Bill 2643.
• K.S.A. 79-2968(a) -- the interest rate applied to unpaid tax.
• 2014 House Bill 2643, Section 18 -- the amending legislation.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 14-08

Original ruling text

Policy & Research Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Nick Jordan, Secretary Department of Revenue Sam Brownback, Governor
Richard Cram, Director

                                      Notice 14-08

                                  Income Tax Penalty

                                      (July 1, 2014)

  During the 2014 Legislative Session House Bill 2643 was passed and signed into law.

Section 18 of the Bill amends K.S.A. 79-3228, which deals with penalties and interest imposed
with regard to Kansas income tax.

  The amendments address a situation in which a taxpayer has timely filed an income tax

return, and paid any tax due, and that return is subsequently adjusted and additional tax is
assessed by the Department. In that event, if the taxpayer pays the additional tax within 30 days
of notice of the liability no 50% penalty will be imposed under subsection (d) of K.S.A. 79-3228.
If, however, the additional tax assessed is not paid within 30 days of notice of the liability a
penalty is imposed. The amount of that penalty will be equal to 50% of the unpaid balance of tax
due.

 The amendments are effective for tax year 2014 and subsequent years. The amended

language, found in subsection (d) of K.S.A. 79-3228, provides:

        (d) For all taxable years ending after December 31, 2013, if any taxpayer who
 has failed to file a return or has filed an incorrect or insufficient return, and after
 notice from the director refuses or neglects within 20 days to file a proper return, the
 director shall determine the income of such taxpayer according to the best available
 information and assess the tax together with a penalty of 50% of the unpaid balance
 of tax due plus interest at the rate prescribed by subsection (a) of K.S.A. 79-2968, and
 amendments thereto, from the date the tax was originally due to the date of payment.
 If, at any time, a taxpayer filed a return and paid in full the tax due as stated on the
 return, at the time required by or under the provisions of this act and subsequently is
 adjusted by the director, and a notice of liability is sent to the taxpayer, no penalty
 shall be assessed under the provisions of this subsection with respect to any
 underpayment of income tax liability due to the adjustment if any such tax is paid
 within 30 days of such notice of liability. If any such tax is not paid within 30 days of
 original notice, the penalty provided under the provisions of this subsection shall
 apply.

                               Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                           Taxpayer Assistance Center
                          Kansas Department of Revenue
                          915 SW Harrison St., 1st Floor
                            Topeka, KS 66612-1588
                              Phone: 785-368-8222
                               Fax: 785-291-3614