PURPOSE: This rule clarifies the circumstances under which an additional tax will be imposed for failing to pay tax on time.

1. (1) Applicability and Scope of Rule. This rule is intended as an interpretive guideline in the application of section 143.751, RSMo and shall apply only with respect to taxable periods beginning after December 31, 1972.
2. (2) Deficiency. The term deficiency shall mean the amount by which the actual Missouri income tax liability of the taxpayer for the taxable year exceeds the total amount of Missouri income tax payments made by the taxpayer for the taxable year on or before the last date prescribed for the payment of the tax (determined with regard to extensions of time for paying the tax but without regard to extensions of time for filing the tax return).
3. (3) Addition to Tax for Negligence or Disregard of Rules. If any part of a deficiency is due to negligence or intentional disregard of the rules (but without intent to defraud) there shall be added to the tax an amount equal to five percent (5%) of the entire amount of the deficiency. If the amount of a taxpayer’s federal taxable income reported on the federal income tax return for any taxable year is changed or corrected by the United States Internal Revenue Service (IRS) or other competent authority or as the result of a renegotiation of a contract or subcontract with the United States, and the taxpayer does not report the change or correction in federal taxable income within ninety (90) days after the final determination of the change, correction or renegotiation, there shall be added to the tax an amount equal to five percent (5%) of the entire amount of deficiency for failure to report the change and to pay the additional tax within that ninety (90)-day period. If the taxpayer does report the change, correction or renegotiation and pays the additional tax within the ninety (90)-day period, the director of revenue will not ordinarily impose the five percent (5%) addition to tax unless the IRS or other competent authority imposed a similar addition to tax. This general rule, however, does not preclude the director from imposing an addition to tax in those instances if it is deemed necessary.

4. (4) Examples: The application of the addition to tax under section 143.751.1., RSMo may be illustrated in the following examples:

   1. (A) Assume that an individual calendar year taxpayer files his/her 1991 income tax return with the Department of Revenue on April 18, 1992 showing a total tax liability of $1,000 with a total amount paid before April 15, 1992 of $600 and a balance due of $400 which taxpayer pays with the return. Further assume that the failure to pay the $400 on or before the last date prescribed for its payment is due to negligence or intentional disregard of rules. In this case, there is an addition to tax of $20 (5% × $400); and
   2. (B) Assume the same facts as in subsection (4)(A) of this rule except that $10 of the $400 deficiency is due to negligence or intentional disregard with the $390 being due to reasonable cause. In this case, there is an addition to tax of $20 (5% × $400). Note that if any part of the deficiency is due to negligence or intentional disregard of the rules, then the addition to tax is imposed on the entire amount of the deficiency.
5. (5) Avoiding the Addition to Tax Under Section 143.751.1., RSMo. The addition to tax for failure to pay taxes on time will not be imposed if no part of the deficiency is due to negligence or intentional disregard of rules. In the absence of fraud, no part of the deficiency will be considered to be due to negligence or intentional disregard if the amount of the tax paid on or before the due date of the return (determined without regard to extensions of time for filing the return) is at least ninety percent (90%) of the total amount of the tax shown on the Missouri income tax return; and if the balance of the tax due is paid on or before the due date of the return, determined with regard to any extensions of time for filing the return. The taxpayer may avoid the addition to tax for failure to pay income taxes on time by making an affirmative showing that the failure to pay was not due to negligence or intentional disregard of rules in that the taxpayer exercised ordinary business care and prudence in providing for payment of the tax liability and was nevertheless unable to pay the tax on or before the last date prescribed by law. In determining whether the taxpayer was unable to pay the tax in spite of the exercise of ordinary business care and prudence in providing for payment of the tax liability, consideration will be given to the amount and the nature of the taxpayer’s expenditures in light of the income the taxpayer, at the time of those expenditures, could reasonably expect to receive prior to the date prescribed for the payment of the tax. As an example, a taxpayer incurring lavish or extravagant living expenses in such an amount that the remainder of his/her assets and anticipated income will be insufficient to pay the tax has not exercised ordinary business care and prudence in providing for the payment of the tax liability. The taxpayer must make an affirmative showing of all the facts relating to his/her failure to pay the tax on time in the form of a written statement containing a declaration that it is made under penalties of perjury. The addition to tax under section 143.751.1., RSMo will not be assessed when the director of revenue makes a determination on the basis of the taxpayer’s written statement that no part of the deficiency was due to negligence or intentional disregard of rules. The mere absence of negligence or intentional disregard with respect to some part of the deficiency is insufficient and the taxpayer must show that no part of the 12 CSR 10-2

deficiency was due to negligence or intentional disregard of rules.

1. (6) Additions to Tax Under Section 143.751.1., RSMo Not Applicable—When. The five percent (5%) addition to tax provided for in section 143.751.1., RSMo will not apply when the provisions of section 143.751.2., RSMo (relating to addition to tax for fraud) or section 143.751.4., RSMo (relating to penalties for willful failure to remit withholding taxes) apply to the same deficiency.
2. (7) Addition to Tax For Fraud. If any part of a deficiency is due to fraud, there shall be added to the tax an amount equal to fifty percent (50%) of the entire amount of the deficiency. For example, assume an individual calendar year taxpayer files his/her 1991 income tax return on April 18, 1992 showing a total tax liability of $1,000 with a total amount paid before April 15, 1992 of $600 and a balance due of $400 which the taxpayer pays with the return. Further assume that the taxpayer had reasonable cause for failure to pay the $400 on or before the last date prescribed for its payment. Further assume that the taxpayer fraudulently claimed charitable contributions on his/her income tax return by understating his/her income tax liability by $6. In this case, an addition to tax of $203 will be imposed under section 143.751.2., RSMo computed as follows: 50% × $406 = $203. Note that if any part of a deficiency is due to fraud, then the addition to tax of fifty percent (50%) applies with respect to the entire amount of the deficiency.
3. (8) Taxpayer Fraudulent Intent—Penalty. Any person who, with fraudulent intent, shall fail to pay any tax or to make, render, sign or certify any return or to supply any information within the time required by law shall be liable for a penalty of not more than $1,000 in addition to any tax, addition to tax, other penalty or interest which is required to be imposed, assessed and collected by the director of revenue.
4. (9) Failure of Employer to Remit Taxes Withheld From Employees—Addition to Tax. If an employer, without intent to evade or defeat the tax or its payment, fails to make a return and pay to the director of revenue any taxes withheld by him/her from the wages of his/her employees on or before the date prescribed for payment, s/he shall be liable for those taxes and shall pay the same together with interest and an addition to tax of five percent (5%). This addition to tax is imposed without regard to whether or not extenuating circumstances disclose a reasonable cause or lack of willful neglect for the nonpayment. For example, assume an employer withholds taxes from its employees’ wages in the month of January of $800. Also assume that the taxpayer pays the taxes (less the employer compensation under section 143.261, RSMo) on February 17 and that the employer has reasonable cause for failure to pay the taxes on or before the last date prescribed for its payment (February 15). In this case, an addition to tax of $40 will be imposed under section 143.751.3., RSMo computed as follows: 5% × $800 = $40. Note that the employer compensation is not allowed unless the withholding taxes are paid on or before the last date prescribed for their payment.
5. (10) Employer’s Willful Failure to Collect, Truthfully Account For or Pay Over Employee Taxes. If any person willfully fails to collect, truthfully account for, pay over or willfully attempt, in any manner, to evade or defeat the tax or its payment, that person shall be liable for a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over in addition to any tax, interest, addition to tax or other penalty provided for by law.
6. (11) Employer Fraudulent Intent—Penalty. If any person, with fraudulent intent, shall fail to pay, or to deduct or withhold and pay, any tax or to make, render, sign or certify any return or to supply any information within the time required by law, that person shall be liable to a penalty of not more than $1,000 in addition to any other amounts required to be imposed, assessed and collected by the director of revenue.

AUTHORITY: section 143.961, RSMo 1986.* Regulation 1.751 was first filed Dec. 22, 1975, effective Jan. 2, 1976. Amended: Filed Sept. 1, 1993, effective April 9, 1994.

*Original authority: 143.961, RSMo 1972.