Tax Department imposes penalties for late filings and unpaid taxes

On April 24, 2025, Indiana lawmakers introduced House Bill 1427, a legislative proposal aimed at reforming tax penalty structures for individuals and businesses in the state. This bill seeks to address issues surrounding tax compliance by modifying the penalties associated with late tax filings and payments, a move that could significantly impact taxpayers across Indiana.

The primary focus of House Bill 1427 is to establish a clearer framework for penalties related to tax returns. Under the proposed legislation, individuals who fail to file their tax returns or pay the full amount owed will face a penalty of ten percent of the tax due. This includes penalties for not filing electronically when required, not paying the full tax amount, or failing to remit taxes held in trust. Notably, the bill also stipulates that a substantially blank or unsigned return will not be considered valid, which could affect many taxpayers who may not fully understand filing requirements.

One of the key provisions of the bill allows taxpayers to avoid penalties if they can demonstrate that their failure to comply was due to reasonable cause and not willful neglect. This provision aims to provide some relief to those who may encounter genuine difficulties in meeting tax obligations. Taxpayers will need to submit a written statement under penalty of perjury to claim this exemption, which adds a layer of accountability to the process.

The introduction of House Bill 1427 has sparked discussions among lawmakers and tax experts regarding its implications. Supporters argue that the bill could encourage timely tax compliance by providing clearer guidelines and reducing penalties for those who can justify their late filings. However, critics express concern that the bill may inadvertently complicate the tax filing process for average citizens, particularly those unfamiliar with the nuances of tax law.

Economically, the bill could have significant implications for state revenue. By potentially increasing compliance rates, Indiana may see a boost in tax collections. However, if penalties are perceived as too harsh, it could lead to increased frustration among taxpayers, possibly resulting in lower compliance rates in the long run.

As House Bill 1427 moves through the legislative process, its future remains uncertain. Lawmakers will need to weigh the benefits of clearer tax compliance measures against the potential challenges they may pose to taxpayers. The outcome of this bill could reshape how Indiana residents approach their tax obligations, making it a critical issue for the community to follow closely.