PURPOSE: This rule sets forth the circumstances under which an additional tax will be imposed against an individual, corporation or other taxpayer for failing to file income tax returns on time.

1. (1) Applicability and Scope of Rule. This rule is intended as an interpretive guideline in the application of section 143.741, RSMo and is applicable only with respect to taxable periods beginning after December 31, 1972. This rule applies to the failure to file income tax returns, amended income tax returns and employer withholding returns which are required to be filed. It does not apply to the failure to file a declaration of estimated tax.
2. (2) Determination of Addition to Tax. Section 143.741.1., RSMo imposes an addition to the tax at the rate of five percent (5%) per month, or fraction of a month, up to a maximum of twenty-five percent (25%) in the aggregate, for the failure by a taxpayer to file any required return by the date prescribed for its filing unless the failure is due to reasonable cause and not due to willful neglect. The date prescribed for filing includes any approved extensions of time for filing.
3. (3) Determination of Percentage. If the date prescribed for filing a return is the last day of a calendar month, each succeeding calendar month or fraction of a month during which the failure to file the return continues shall constitute a month. For example, if a return due on March 31 is filed any time between April 1 and April 30, the rate would be five percent (5%); if filed any time between May 1 and May 31, the rate would be ten percent (10%); and so on, up to an aggregate of twenty-five percent (25%). If the date prescribed for filing a return is a date other than the last day of a calendar month, the period which terminates with the date numerically corresponding to the last day in the succeeding calendar month and each successive period shall constitute a month. If, in the month of February, there is no date corresponding to the date prescribed for filing the return, the period from the date in January through the last day of February shall constitute a month. For example, if a return due on January 30 is filed any time between January 31 and February 28 (29 if a leap year) the rate would be five percent (5%); if filed any time between March 1 and March 30, the rate would be ten percent (10%); if filed between March 31 and April 30, the rate would be fifteen percent (15%); and so on, up to an aggregate of twenty-five percent (25%). The fact that the date prescribed for filing the return or the corresponding date in any succeeding month falls on a Saturday, Sunday or legal holiday is immaterial in determining the number of months for which the addition to tax applies.
4. (4) Determination of Amount Upon Which the Addition to Tax Will be Applied. The amount upon which the addition to tax under section 143.741.1., RSMo is to be applied shall be determined by subtracting from the amount required to be shown as tax on the return, the amount of the tax which is paid on or before the last date prescribed for payment and the amount of any credit which may be claimed against the tax.

5. (5) The application of the addition to tax under section 143.741.1., RSMo is illustrated by the following examples:

   1. (A) Assume an individual calendar year taxpayer files his/her 1991 income tax return on July 20, 1992, and the failure to file on or before the prescribed date (April 15, 1992) is not due to reasonable cause. The total tax liability for the year was $1,000 of which $600 had been paid by withholding from wages and $400 was paid when the return was filed. In this case, there will be imposed an addition to tax under section 143.741.1., RSMo of $80, determined as follows:

      1. 1. Total tax liability for the year $1,000
      2. 2. Less taxes timely paid $ 600
      3. 3. Net amount due $ 400

Twenty percent of line 3. (5% per month for 3 months from April 15 through July 15 and 5% for fraction part of the month from July 15 through July 20) $ 80

1. (B) Assume the same facts as in subsection (5)(A) of this rule except that the $400 was paid on May 1, 1992. In this case there is imposed an addition to tax under section 143.741.1., RSMo of $80, determined in the same manner as in subsection (5)(A) of this rule. Note that the tax liability for the year is only reduced by the amount of the tax paid on or before the last date prescribed for payment (April 15, 1992);

2. (C) Assume an employer is required to withhold and remit taxes on a monthly filing frequency. The employer withholds taxes from its employees’ wages in January in the amount of $200. The employer remits $50 of the amount withheld on February 15 and the remaining $150 on March 15. The employer does not file monthly returns for January until June 1. The failure to file the return on or before the prescribed date (February 15) is not due to reasonable cause. In this case there will be imposed an addition to tax under section 143.741.1., RSMo of $30, determined as follows: 12 CSR 10-2

   1. 1. Amount required to be shown on January’s return $200
   2. 2. Less amounts timely paid (see section 143.221, RSMo) $ 50
   3. 3. Net amount due $150
   4. 4. Twenty percent of line 3. (5% per month for four months from February 15 through June 1) $ 30
3. (D) Assume the same facts as in subsection (5)(C) of this rule except that January’s return is filed on February 15. In this case, there is no addition to tax under section 143.741.1., RSMo since the monthly withholding return was filed on or before the last date prescribed for its filing (February 15). However, an addition to tax under section 143.751.3., RSMo would be imposed.

1. (6) Addition to Tax Not Imposed—Reasonable Cause. A taxpayer who wishes to avoid the addition to tax for failure to file a return by the date prescribed for its filing must submit a written statement showing all facts relied upon in support of the contention that the failure to file was on account of reasonable cause. The statement shall contain a written declaration that it is made under penalties of perjury and may be submitted to the director of revenue with the return. The mere absence of willful neglect is not sufficient reason for avoiding imposition of the addition to tax for failure to file a return. There must be an affirmative showing of reasonable cause for the failure and the burden of proof is upon the taxpayer to establish the reasonable cause. If the taxpayer can show delinquency was due to a reasonable cause and not to willful neglect, the addition to tax will not be imposed. If the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time, then the delay is due to a reasonable cause. This rule prescribes no specific standards of reasonable cause for failure to file the return on time, but the following examples will provide guidelines as to what might constitute reasonable cause:

   1. (A) Death or serious illness of the taxpayer or the death or serious illness of an immediate member of the taxpayer’s family. In the case of a corporation, estate, trust, and the like, the death or serious illness must have been of an individual having sole authority to execute the return or of a member of that individual’s immediate family;
   2. (B) Unavoidable absence of the taxpayer. In the case of a corporation, estate, trust, and the like, the absence must have been of an individual having sole authority to execute the return;
   3. (C) Destruction by fire or other casualty of the taxpayer’s place of business or business records; or
   4. (D) The taxpayer’s ability to file the return has been materially impaired by civil disturbances. AUTHORITY: section 143.961, RSMo 1986.* Regulation 1.741 was originally filed Dec. 22, 1975, effective Jan. 2, 1976. Amended: Filed Sept. 1, 1993, effective April 9, 1994.

*Original authority 1972.

United States v. Boyle, 105 S. Ct. 687 (1985). The issue in this case was whether the taxpayer had proved reasonable cause for the late filing of a federal estate tax return under Internal Revenue Code 6651(a)(1). The language in this section is very similar to the language contained in section 143.741, RSMo and other Missouri revenue penalty statutes. To show reasonable cause, the Supreme Court said the taxpayer must “demonstrate that he exercised ‘ordinary business care and prudence’ but nevertheless was ‘unable to file the return within the prescribed time;”

Estate of Clifford Bockelman v. Director of Revenue, Case No. RV-83-3510 (A.H.C. 5/14/86). The personal representative’s attorney had told her that they did not need to worry about the Missouri estate tax return until such time as all federal estate tax matters had been completed. The Administrative Hearing Commission determined that the personal representative had exercised ordinary business care and prudence and thus the failure to file Missouri estate tax return in a timely fashion was due to reasonable cause and not willful neglect.

Estate of Orpha T. Neusteter v. Director of Revenue, Case No. RV-86-2063 (A.H.C. 11/6/87). The personal representative had not established the daily volume of mail handled by his office nor a record of timely filings over a period of time. These facts, the commission stated, were essential. In addition, the commission noted that the personal representative had nine months to file and the taxpayer in Armco had fifteen days. Based on this, the personal representative did not establish that his failure to file was due to reasonable cause and not willful neglect. Therefore, the additions were properly imposed by the department.