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C. Penalties and Interest (G.S. 105-229 through G.S. 105-236,
G.S. 105-241.1, and G.S. 105-253)
- General
The North Carolina Statutes provide both civil and criminal penalties
for failure to comply with the tax laws.
In addition to any applicable penalty, all assessments of taxes
or additional taxes bear interest at the rate established pursuant
to G.S. 105-241.1(i).
- Failure to File and Failure to Pay Penalties
Under the provisions of G.S. 105-236, both the late filing and
late payment penalties can be applied for the same month. If the
return is filed late without payment of the tax shown due, both
the late filing and late payment penalties will be assessed at
the same time.
The penalty for failing to file any return on the date it is due,
is equal to five percent (5%) of the amount of the tax if the
failure is for not more than one month, with an additional five
percent (5%) for each additional month, or fraction thereof, until
the return is filed. If the return is filed under extension, the
late filing penalty will be assessed from the extended filing
date rather than from the original due date. The penalty shall
not exceed twenty-five percent (25%) of the tax due or be less
than five dollars ($5.00). Failure to file any return by the date
it is due could result in the suspension of the taxpayer's Articles
of Incorporation or Certificate of Authority.
The late payment penalty is the greater of five dollars ($5.00)
or ten percent (10%) of the tax not paid by the original due date
of the return and will apply on any remaining balance due if the
tax paid by the original due date of the return is less than ninety
percent (90%) of the total amount of tax due. If the ninety percent
(90%) rule is met, any remaining balance due, including interest,
must be paid with the tax return on or before the expiration of
the extension period to avoid the late payment penalty.
The late payment penalty will not be assessed if the amount shown
due on an amended return is paid with the return. Proposed assessments
of additional tax due are subject to the ten percent (10%) late
payment penalty if payment of the tax is not received within 30
days of the assessment.
The failure of officers, trustees and receivers to pay taxes due
or accrued before allowing funds in their custody to be paid out
is subject to the penalty policy of the Department.
- Penalty for Bad Check
When any uncertified check submitted to the Department of Revenue
by a taxpayer is returned because of insufficient funds or the
nonexistence of an account of the drawer, a penalty equal to ten
percent (10)%) of the check is assessed. The penalty shall not
be less than one dollar ($1.00) or more than one thousand dollars
($1,000). This penalty does not apply if the Secretary finds that,
when the check was presented for payment, the drawer of the check
had sufficient funds in an account at a financial institution
in this State to pay the check and, inadvertently, failed to draw
the check on the account that had sufficient funds.
- Penalty for Bad Electronic Funds Transfer
When an electronic funds transfer cannot be completed due to insufficient
funds or the nonexistence of an account of the transferor, a penalty
equal to ten percent (10%) of the amount of the transfer will
be assessed. The penalty shall not be less than one dollar ($1.00)
or greater than one thousand dollars ($1,000).
- Making Payment in Wrong Form
If a taxpayer makes a payment of tax in a form other than the
form required by the Secretary a penalty equal to five percent
(5%) of the amount of the tax will be assessed. The penalty shall
not be less than one dollar ($1.00) or greater than one thousand
dollars ($1,000).
- Negligence Penalties
If a taxpayer fails to comply with the tax laws, without intent
to defraud, a penalty equal to ten percent (10%) of any tax deficiency
is assessed. However, if either taxable income or the tax liability
is understated by twenty-five percent (25%) or more, the penalty
is twenty-five (25%) of the tax deficiency.
A negligence penalty cannot be assessed when the fraud penalty
has been assessed with respect to the same deficiency. There is
no minimum dollar amount of negligence penalty.
- Failure to Report Federal Changes
Any taxpayer that receives a federal revenue agent's report or
other final determination of taxable income and fails to report
these federal changes within two years from the date of receipt
of the federal report or determination is subject to the failure
to file penalty and forfeits the right to any refund as a result
of the federal changes. The failure to file penalty begins at
the expiration of the two-year period.
- Fraud
If there is a deficiency or delinquency in payment of any tax
because of fraud with intent to evade the tax, a penalty equal
to fifty percent (50%) of the total deficiency is assessed.
- Criminal Penalties
Any taxpayer that willfully attempts, or any person who aids or
abets any taxpayer to attempt in any manner, to evade or defeat
a tax or its payment, shall, in addition to other penalties provided
by law, be guilty of a Class H felony.
Any taxpayer required to pay any tax, to file any return, to keep
any records, or to supply any information, that willfully fails
to pay the tax, file the return, keep the records, or supply the
information, at the time or times required by law, or rules pursuant
thereto, shall, in addition to other penalties provided by law,
be guilty of a Class 1 misdemeanor. Notwithstanding any other
provision of law, no prosecution for a violation brought under
this subdivision shall be barred before the expiration of six
years after the date of the violation.
Any person, pursuant to or in connection with the revenue laws,
who willfully aids, assists in, procures, counsels, or advises
the preparation of a return, affidavit, claim, or any other document
that the person knows is fraudulent or false as to any material
matter, whether or not the falsity or fraud is with the knowledge
or consent of the person authorized or required to present or
file the return, affidavit, claim, or other document, shall be
guilty of a Class H felony.
Any officer, agent, and/or employee of any person, firm or corporation
subject to the revenue laws of this State, who willfully fails,
refuses, or neglects to make out, file, and/or deliver any reports
or blanks, as required, or to answer any question in the reports
or blanks, or who knowingly and willfully gives a false answer
to any question that is within the scope of his/her knowledge,
or refuses to make any information requested available shall be
guilty of a Class 3 misdemeanor and assessed a fine of not less
than one hundred dollars ($100) or more than one thousand dollars
($1,000) for each offense.
- Collection Assistance Fee
Any tax, penalty, and interest not paid within 90 days after a
final notice of assessment has been mailed is subject to a twenty
percent (20%) collection assistance fee. The fee will not apply
if payments are being made pursuant to an installment agreement
that became effective within 90 days after the final notice was
mailed.
- Interest
Interest accrues on tax not paid by the original due date even
though a taxpayer may have an extension of time for filing the
return. Interest on overpayments accrues beginning 45 days after
the latest of (1) the date the final return was filed, (2) the
date the final return was due to be filed, or (3) the date of
the overpayment. The law requires the interest rate to be determined
on or before June 1, for the following six-month period beginning
on July 1 and on or before December 1 for the following six-month
period beginning January 1. The current rate of interest may be
obtained by contacting the Department of Revenue.
- Underpayment of Estimated Income Tax
The computation of penalty for underpayment of estimated income
tax should be made on Form CD-429B. A taxpayer does not need to
file this form with the return to which it pertains, but should
include any penalty due in the payment of tax due.
- Waiver of Penalty
Any penalty may be waived by the Secretary of Revenue pursuant
to the Department of Revenue penalty policy. A request for waiver
or reduction of penalty must be in writing and must include an
explanation for the request. Interest on the tax cannot be waived
or reduced.
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