Calculation Of Estimated Corporate Income Tax Penalty And Interest On Underpayment

RPD-41287 07

New Mexico Taxation and Revenue Department

Rev. 02/2008

2007 Calculation of Estimated Corporate Income Tax

Penalty and Interest on Underpayment

(page 3 of 3)

Enter your federal employer identification number

Print your company’s name

Section III: continued

1st Quarter

2nd Quarter

3rd Quarter

(a)

(b)

(c)

Calculation Period 4

(Calendar-year taxpayers enter Jan 1, 2008 - Mar. 15, 2008)

21.

Enter the number of days from the first day of the calendar quarter

in which the interest rate changed, or January 1, 2008, to the date

the amount on line 5 of the same column was paid OR March 15,

21.

2008, whichever is earlier.

22.

Interest. Multiply the underpayment from the corresponding column

of line 5 by the number of days on line 21, by 0.00019. Underpay-

22.

ment x number of days x .00019 =

23.

Penalty. Multiply the underpayment from the corresponding column

of line 5 by number of months or partial months within this calcula-

tion period that the payment was not made, by 0.02. If the tax was

not paid during this calculation period, multiply the underpayment

by (2 x 0.02). Underpayment x number of full/partial months x

23.

0.02 =

24.

Add interest computed in all columns of lines 13, 16, 19 and

22. This is your interest on underpayment of estimated income

24.

tax.

25.

Add penalty computed in all columns of lines 14, 17, 20 and

23. This is your penalty on underpayment of estimated income

25.

tax.

Legislature Enacts Lower Interest Rates

and Higher Maximum Late Penalties

Effective January 1, 2008, the interest rate charged on underpayments and paid on overpayments

of taxes and fees administered by the Taxation and Revenue Department is reduced from 15

percent per year to the annual rate established each quarter for individual income tax purposes

under the U.S. Internal Revenue Code (IRC). Over the last several years the IRC annual interest

rate has been much lower than 15 percent, ranging from a high of 9 percent to a low of 4 percent.

Interest is computed on a daily basis.

Also effective January 1, 2008, the maximum penalty increases for failure to pay tax or to file a

return due to negligence or disregard of Department rules or regulations. The maximum penalty

is increased from 10 percent to 20 percent of the tax due.

What does this mean? If a taxpayer has an outstanding balance of taxes or fees owed to the Taxa-

tion and Revenue Department, beginning January 1, 2008, the interest rate charged per day will

be lower, but the maximum late penalty charge will be higher. To avoid additional late penalty

charges, taxpayers should pay their outstanding tax liability before January 1, 2008, when the

new maximum penalty threshold takes effect.

The IRC rate for each three month period is announced by the Internal Revenue Service (IRS)

in the last month of the previous quarter. The annual rate for the first quarter of 2008 is 7%. The

annual and daily interest rates for each quarter will be posted on the Department’s web site. The

chart will be updated after the new rates are announced by the IRS.

Calculation Of Estimated Corporate Income Tax Penalty And Interest On Underpayment - 2008 Page 3

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