Penalties and Interest
If you do not pay the total amount of taxes you owe, the law charges interest on any unpaid tax. Interest is computed at the applicable rate from the original due date to the date of payment, whether or not you have been granted an extension. For most taxpayers the original due date is April 15th.
If you do not file by the original due date, a late filing penalty of 5% of the net tax due is added for each month your tax return is late. This penalty cannot exceed 25% of your tax.
The penalty for late payment is 10% of the tax shown due and not paid by the original due date. However, if you have an extension and pay at least 90% of your tax by the original due date, the late payment penalty will not apply if you pay the remaining balance due, including interest, with the return by the extended due date.
Interest on the underpayment of estimated income tax is computed on Form D-422, Underpayment of Estimated Income Tax by Individuals. If your income tax liability after credits and North Carolina tax withheld is $1,000.00 or more, you were required to pay estimated tax. If you are a farmer or a fisherman, file your 2016 North Carolina income tax return and pay the tax due by March 1, 2017, and you do not owe interest: Enter the letter F in the exception box next to line 26e of Form D-400.
If the IRS changes your federal return, you must amend your State return within 6 months after the date the federal report is received. If you fail to report the federal change, you must pay a 5% penalty for each month the federal change is not reported to the Revenue Department. The penalty cannot exceed 25% of your additional tax.
If you understate your income, overstate your deductions, or make erroneous adjustments to your taxable income you will be subject to a negligence penalty of 10%. When there is an understatement of taxable income equal to 25% or more of gross income, the 25% large individual income tax deficiency or other large tax deficiency penalty will be assessed. If the IRS changes your federal income tax return and assesses the negligence or accuracy penalty, you will be subject to a negligence penalty for North Carolina tax purposes.
If you fail to pay an overdue tax debt, the Revenue Department can assess a 20% Collection Assistance Fee on any tax, penalty, and interest not paid within 90 days after the tax debt becomes collectible. The fee will not apply if you are making payments under an installment agreement that became effective within 90 days after the debt became collectible.
If you write a bad check to the Revenue Department, you will be charged a bad check penalty of 10% of the check amount that was returned for insufficient funds. The bad check penalty cannot exceed $1,000.
If it is discovered that there is fraud with intent to evade or defeat the tax, you will be assessed a fraud penalty of 50% of your unpaid tax.
If it is discovered that a frivolous return has been filed you may be assessed up to a $500.00 penalty. A frivolous return is a return that meets both of the following requirements: a. it fails to provide sufficient information to permit a determination that the return is correct or contains information which positively indicates the return is incorrect, and b. it evidences an intention to delay, impede or negate this State or purports to adopt a position that is lacking in seriousness.
If you have any questions regarding penalties or interest you may call toll-free at 1-877-252-3052 or you may contact a service center.
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