Interest and Penalties

Montana charges a penalty for filing after the due date.

• A $50 minimum, or
• 5% of the outstanding tax per month
• Up to a maximum of 25% of the tax due

Montana charges a penalty if a taxpayer fails to pay 100% of the tax liability by the original due date.

• 0.5% per month, up to 12% of the tax due, or
• 1.5% per month, up to 15% of the tax due for:
  
  • Estimated and Withholding Taxes
  • TDD Telephone Communications Service Fee
  • Retail Telecommunications Excise Tax
  • Lodging Facilities Sales and Use Taxes
  • Rental Vehicle Tax

Montana charges a penalty for purposely or knowingly (as defined in 45-2-101, MCA) failing to file a return or report by the due date or within 60 days of receiving a notice from the department.

• Pass-through Entities: $1,000
• All Others: 15% per month, up to 75%

Montana charges a $2,500 penalty for taxpayers who file a return:

• Without the information needed to determine tax
• Showing substantially incorrect tax
• Based on a frivolous tax position (26 USC 6702)
• Based on actions meant to impede tax collection

Montana charges a penalty if a taxpayer files a fraudulent return and:

• Tax is due: 75% of the tax due that is related to the fraudulent amount reported
• The taxpayer has no tax liability and filed a fraudulent claim for a credit: 75% of the credit claimed

Montana charges a penalty when a taxpayer understates their tax liability:

• Individuals, Estates and Trusts: May be subject to the penalty if their understatement is more than 10% of the amount of tax or $3,000.
• All Other Taxpayers: Subject to the penalty if their understatement is at least $10,000 and the understatement is at least 10% of the amount determined by the department.

The penalty is equal to 20% of the understatement.

An understatement equals the amount determined by the department minus the amount originally reported by the taxpayer.

Montana charges interest on outstanding taxes and underpaid estimated taxes.

Interest is computed daily, beginning on the original due date of the tax return.

• The 2025 annual interest rate on individual income tax, estate and trust, and pass-through entity taxes and the underpayment of estimated taxes is 8%, computed daily at 0.021918%
• The 2025 interest rate on all other taxes is 11%, computed daily at 0.030055%

To figure out your interest rate, use this formula:

In case you owe tax from a prior year or years, please refer to the following table of Montana's historical interest rates:

Automatic Waivers

If you have paid the entire amount of tax and interest assessed on your account within 30 days of receiving a notice, you will receive an automatic waiver of the late payment penalty.

Request a Waiver

You may request a waiver of penalty if you have reasonable cause. Reasonable cause means that you exercised ordinary business care but were still unable to meet a department deadline. You must submit your waiver in writing. You may either file the Request for Informal Review (Form APLS101F) or send us a written request.  Your waiver request must establish reasonable cause for the late payment.

Please send your request to the department by:

Mail

Email

DORObjections@mt.gov

Need for Wage Withholding and Estimated Payments

Montana’s income tax system includes provisions that require making payments throughout the year to sufficiently cover an individual’s expected tax liability.

These payments are generally made through wage withholding and estimated payments. If an individual owes more than $500 in tax and didn’t make enough payments, they may be subject to interest on the underpayment of estimated taxes.

Interest due on underpaid taxes can be calculated using form Montana Underpayment of Estimated Tax by Individuals, Estates, and Trusts (Form EST-I).

Changes in Montana Tax Law for 2024

Significant changes to Montana tax law took effect for the 2024 tax year. These changes affected the starting point for taxable income calculation, the effect of dependents, and the deductions that could be claimed for computing Montana taxable income.

As a result, some individuals did not have enough wage withholding or make sufficient estimated tax payments and may have been charged Interest on Underpayment of Estimates.

Waiver Provided by House Bill 863

To address this unexpected assessment, the Montana Legislature passed House Bill 863. The bill provides the Department of Revenue more authority to waive interest in this situation but only for the 2024 tax year.

Future Periods

The Department encourages taxpayers to review Publication 1-Prepaying Income Tax in Montana and Montana Form MW4 to avoid this issue in the future.

How to Request the Waiver

You can ask the Department of Revenue to waive Interest on Underpayment of Estimates for the 2024 tax year if:

• You filed your 2024 Montana income tax return on or before April 15, 2025
• You paid your 2024 tax in full
• You were assessed interest for underpayment of estimated taxes (including any amount you reported yourself)

Deadline:

The Department must receive your waiver request by January 1, 2026. Requests received after December 31, 2025 will not be considered.

Steps to Apply

1. Use Request for Informal Review (Form APLS101F) to request this waiver.
2. Fill in the "Taxpayer Information" section.
3. Mark the box in the “Penalty Waiver Request” portion and write in “under House Bill 863” after “Mark this box if you are requesting a waiver of penalty.”
4. Sign the “Declaration” section and complete the “Authorized Representative” portion if you choose to have someone represent you.
5. Submit the form as indicated in the instructions. You can also submit your waiver through an email with all the relevant information at DORObjections@mt.gov. 

Questions?

For questions, call (406) 444-6900 or use Montana Relay 711 for the hearing impaired.