Frequently Asked Questions
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- Electronic Filing
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- Tax Type
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- Delinquency / Incomplete Notification
- Penalty and Interest
Q1. When am I liable for paying penalty and interest?
Anytime a taxpayer makes a late periodic payment during the year or files and pays a tax return late,
the Department assesses penalty and interest.
Q2. How are penalty and interest calculated on late periodic payments?
The late payment penalty is 5% and is applied to the tax due for the periodic payment.
For example: If you are paying the Chicago Transaction Tax for the August 2011 period, the due
date for the payment is the 15th day of the following month. In this case, that date would be
September 15th, 2011. If the payment is made anytime after that date, a 5% late payment penalty
is applied to the tax due.
In addition to the late payment penalty, the Department of Finance also assesses interest on the late
payment. The Department's stated interest rate is 12% per year calculated daily. The formula for
calculating the interest is as follows:
[Tax Due x (days late in year / 365) x 12%]
For example, using the preceding example, if a taxpayer deems they owe $1,000.00 in Chicago
Transaction Tax for the month of August 2011, they would only owe that amount through 9-15-11
. However, if the taxpayer were to make the payment on 9-29-11, the Department would
consider the tax late and the late penalty and interest would also be due.
Tax Due: $1,000.00
Late Penalty: $1,000.00 x 5% = $50.00
Interest: [$1,000.00 x (14 / 365) x 12%] = $4.60
Total due (if paid 11-14-05) = $1,054.60
Should the taxpayer only pay the tax due then the Department would allocate the payment as follows:
First to any interest owed, then any tax that is owed, and finally any penalty. If a tax balance
remains, interest will continue to accrue on the remaining tax.
Q3. How are penalty and interest calculated on the return level and what if I do not make any
periodic payments during the year?
When a taxpayer files a return late (after 8-15-XX for most taxes), penalty and interest apply on
the return level as well.
Late Filing Penalty: The late filing penalty is the greater of 1% of the total tax due (up to a
maximum of $5,000) or 5% of the payment being made with the return. However, if the return is being
filed timely but only the tax payment is late, then only the 5% late payment penalty is due.
Interest: Interest is calculated the same as in the previous example at 12% calculated daily.
Tax return is being filed timely (by 8-15-XX) but the final tax payment is late:
Resolution: the taxpayer would not be subject to the late filing penalty but the 5% late payment
penalty and interest would be applied to the tax payment.
Tax return and final tax payment is being filed late.
Resolution: The taxpayer would be subject to the late payment penalty AND the late filing
penalty. The late filing penalty would be the greater of 1% of the total tax due for the year
(up to $5,000) or 5% of the final tax payment being made.
Also 12% interest calculated daily would be due.
Q4. When I am on the Webtax system and I calculate my tax form, is the total amount due the
amount I need to pay in order to close out the tax year?
YES, provided that the taxpayer did not miss any periodic payments and they were all filed
However, if a taxpayer did not pay all periods in the tax year or made late payments, then they would
need to correct the matter by making the periodic payments using our Webtax system. If a taxpayer
does not do this, and they do have periodic balances, then the tax year will not be closed out and a
DF (deficiency status) will remain noted on the account. If the matter goes unresolved, the
Department will enter a hold on the account preventing renewal of the business license.
- Deficient(DF) / Delinquent(DL) / Incomplete(DI) / Unsigned(DU)