Each person residing in the United States must pay both federal and state taxes. Failure to pay, underpay, or failure to file an Arizona State Tax Return will lead a taxpayer to pay penalties. These penalties will increase a taxpayer's tax burden. To avoid them, taxpayers should file their taxes on time.
Late Filing Penalty
File Arizona state tax returns by April 15. Failure to file on time leads to a penalty of four and a half percent of the owed tax for each month the return is late. This amount may not exceed 25 percent. However, the state will pro rate this penalty if the return is filed in the middle of a month. For example, if a person owed $100 and made his filing one and a half months late, the late penalty is $100 times 4.5 percent plus $100 times 4.5 percent times 0.5 (for half the month), which equals $4.5 plus $2.25, or $6.75. Pro rating is only applying the tax penalty to the dates the tax return was not filed.
Late Payment Penalty
If the taxpayer fails to pay his tax payment, the late penalty is half of a percent of the tax liability for each month it is late. Again, Arizona will pro rate the penalty if the return is filed in the middle of a month. This penalty cannot be greater than 10 percent. For example, if a person owed $100 and made his filing one month and ten days late, the late penalty is $100 times 0.5 percent plus $100 times 0.5 percent times ten divided by thirty (for ten days late), which equals $0.50 plus $0.17, for a total of $0.67. Pro rating is only applying the tax penalty to the dates the tax return was not filed.
Extension Underpayment Penalty
If a taxpayer files an extension, then extensions require ninety percent of the tax due paid by April 15. If this amount is not paid, there is a penalty of half of a percent on the unpaid portion for each month the amount is unpaid. Once again, Arizona will pro rate this penalty if the return is filed in the middle of a month. This penalty may not exceed 25 percent. For example, if a person filed an extension and the extension shown the taxpayer owed $100 and made his filing one month and ten days late, the late penalty is $90 times 0.5 percent plus $90 times 0.5 percent times ten divided by thirty (for ten days late), which equals $0.45 plus $0.15, for a total of $0.60. The penalty applies to $90 because only 90 percent is due when filing an extension. Pro rating is only applying the tax penalty to the dates the tax return was not filed.
Underpayment of Estimated Tax Penalty
The penalty for underpayment of a taxpayer's estimated tax varies, depending upon the individual taxpayer. To determine the penalty, a taxpayer must fill out and file Arizona Form 221.