§ 3202. Interest and penalties

(a) Failure to pay; interest. When a taxpayer fails to pay a tax liability imposed by this title (except the motor vehicle purchase and use tax) on the prescribed date of payment, the Commissioner may assess and the taxpayer shall then pay a sum of interest computed at the rate per annum established by the Commissioner pursuant to section 3108 of this title on the unpaid amount of that tax liability for the period from the prescribed date to the date of full payment of the liability.

(b) Penalties.

(1) Failure to file. When a taxpayer fails to file a tax return required by this title (other than a return required by chapter 151, subchapter 5 of this title for estimation of nonwithheld income tax), on the prescribed date of payment or the date as extended pursuant to section 5868 of this title, unless the taxpayer affirmatively shows that the failure is due to reasonable cause and not due to willful neglect, then in addition to any interest payable pursuant to subsection (a) of this section, the Commissioner may assess and the taxpayer shall then pay a penalty that shall be equal to five percent of the outstanding tax liability for each month, or portion thereof, that the tax return is not filed; provided, however, that in no event shall the amount of any penalty imposed under this subdivision exceed 25 percent of the tax liability unpaid on the prescribed date of payment. If the return is not filed within 60 days after the prescribed date of payment, there shall be assessed a minimum penalty of $50.00 regardless of whether there is a tax liability.

(2) Failure to pay estimated tax. When a taxpayer fails to make payments as required by chapter 151, subchapter 5 or 5A of this title (estimations of nonwithheld income tax and quarterly filing and payment), the Commissioner may assess and the taxpayer shall then pay a penalty that shall be equal to one percent of the outstanding tax liability for each month, or portion thereof, that the tax liability is not paid in full; provided, however, that in no event shall the amount of any penalty assessed under this subdivision exceed 25 percent of the tax liability unpaid on the prescribed date of payment.

(3) Failure to pay. When a taxpayer fails to pay a tax liability imposed by this title (other than a return required by chapter 151, subchapter 5 or 5A of this title for estimation of nonwithheld income tax and quarterly filing and payment) on the prescribed date of payment, then in addition to any interest payable pursuant to subsection (a) of this section, the Commissioner may assess and the taxpayer shall then pay a penalty that shall be equal to, for income tax under chapter 151, subchapters 2 and 3 of this title, one percent and, for all other taxes, five percent of the outstanding tax liability for each month, or portion thereof, that the tax liability is not paid in full; provided, however, that in no event shall the amount of any penalty assessed under this subdivision exceed 25 percent of the tax liability unpaid on the prescribed date of payment.

(4) Negligent failure to pay. When a taxpayer fails to pay a tax liability imposed by this title and the failure is due to negligence or constitutes a substantial understatement of tax, in addition to any interest payable pursuant to subsection (a) of this section, the Commissioner may assess and the taxpayer shall then pay a penalty that shall be equal to 25 percent of that portion of the underpayment. For purposes of this subdivision, “negligence” means any failure to make a reasonable attempt to comply with the provisions of the tax code and “substantial understatement” means an understatement of 20 percent or more of the tax.

(5) Fraudulent failure to pay. When a taxpayer fraudulently or with willful intent to defeat or evade a tax liability imposed by this title fails to pay a tax liability on the prescribed date of payment, requests and receives a refund of a tax liability, or requests but does not receive a refund of a tax liability, then, in addition to any interest payable pursuant to subsection (a) of this section, the Commissioner may assess and the taxpayer shall then pay a penalty equal to the amount of the tax liability unpaid on the prescribed date of payment, the amount received as a refund subsequent to that date, or the amount requested but not received as a refund.

(6) Violation based on income from illegal activity. The penalties provided in subdivisions (1)-(5) of this subsection shall be doubled if the violation is based on income derived from illegal activity. The penalty provided in this subdivision shall be in addition to any other civil or criminal penalties provided by law.

(7) Penalty limitation. A failure to pay shall not be subject to more than one of the penalties set forth in subdivisions (3), (4), and (5) of this subsection. (Added 1997, No. 156 (Adj. Sess.), § 35, eff. April 29, 1998; amended 2001, No. 140 (Adj. Sess.), §§ 9, 11, eff. June 21, 2002; 2013, No. 76, § 6; 2019, No. 175 (Adj. Sess.), § 22, eff. Oct. 8, 2020; 2021, No. 105 (Adj. Sess.), § 502, eff. July 1, 2022; 2021, No. 179 (Adj. Sess.), § 4, eff. January 1, 2022; 2023, No. 6, § 374, eff. July 1, 2023.)