PIT refunds of underpayment and monthly penalties
PURPOSE OF BULLETIN
To inform staff about refunds being sent due to cancellation of the underpayment and monthly penalties, based on reasonable cause, to individual taxpayers who e-filed their return.
The Taxpayer Information System is largely built around requirements for paper return processing. The system assesses the underpayment penalty when the timely filed return is received and posts, and the payment is received and posted later.
The underpayment and monthly penalty may be waived for reasonable cause and refunded if:
- At least 90 percent of the tax liability was paid by the original due date of the return.
- The return was e-filed by the extended due date.
- The balance due was remitted within 21 days from the date the e-filed return was filed.
Example 1: Paper Return: A paper return is received October 9 with 90 percent of the amount due paid by April 15 and final payment with return.
Example 2: e-filed Return: The e-filed return received October 9 with 90 percent of amount due paid by April 15. A paper check for final payment is mailed October 9 and received October 15.
VOLUME AND REFUND SCHEDULE
The FTB will manually review over 20,000 accounts, for tax years 2000 to 2005 and if reasonable cause exits, and the statute of limitations is open, we will begin to waive the underpayment and monthly penalties. Refunds are scheduled to be sent February 5, 2007, through June 29, 2007.
For 2006 tax years and after, a program fix is currently being implemented to reflect this change.