Penalty and Interest or "P&I" is a generic term used to describe a wide range of penalty, interest, and fee liabilities that are calculated and imposed by a tax authority.
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The topics in this section provide background information about penalty and interest functionality.
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Bringing Penalty and Interest Up to Date
Forecasting Penalty and Interest
Credit allocation is the process of taking credits within an obligation and applying business rules to allocate them against tax, penalty, interest, and fees (in other words, allocated by debt category).
We use the term ‘dynamic credit allocation’ to indicate that credit allocation should be re-evaluated any time penalty and interest is calculated, whether for updates or forecasting.
The base product provides zones on Control Central on both the Account Information portal and the Taxpayer Information portal that show the balances by debt category at various levels (person, account, obligation). Refer to the details of the zone for more information.
Configuration required. Dynamic credit allocation must be configured for an obligation. Refer to The Big Picture of Credit Allocation for more information.
Depending on how your system is configured, several business processes may force the recalculation of penalty and interest real-time. Some examples of events in the system that may have been configured to bring P&I up to date are as follows:
· When a tax form posts or is reversed, transferred or adjusted. Basically any state transition of a form that causes adjustments to be created should include a step to bring P&I up to date.
· When a payment is frozen or canceled
· When the effective date of a frozen payment is changed
· An obligation's override due date changes.
· When a waiver is activated or canceled
· An event in an overdue process
In addition to real-time requests to bring P&I up to date, the system provides a background process that may periodically recalculate penalty and interest for all obligations governed by P&I.
A user may also request that P&I is brought up to date using the Credit Allocation zones on Control Central on both the Account Information portal and the Taxpayer Information portal.
Calculation through date. Every time the system recalculates P&I for an obligation its calculation through date is updated. This allows a user to know the accuracy of the balance viewing the details provided by dynamic credit allocation.
The system supports forecasting penalty and interest. This request executes the Calculate P&I logic in memory. A user may ask the system to forecast P&I to the current date or to a future date using the Credit Allocation zones on Control Central on both the Account Information portal and the Taxpayer Information portal.
The tax office generally has broad discretionary power to waive penalty, interest and fees. Waivers may be for part of the amount imposed or the full amount or may be tied to a specific period.
Refer to Waivers for more information about configuring waivers.
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Creating and Activating a Waiver
Each waiver has an associated waiver type. The waiver type defines the configuration information that is common to waivers of a given type.
The base product provides support the following types of waivers:
· One-time waivers. Waivers of this type are used to waive charges for a given assessment / debt category up to a specific amount.
· Effective dated waivers. Waivers of this type are used to waive charges for a given assessment / debt category that occur on or after a given start date. Waiver of this type may optionally specify an end date to waive charges for a specific period.
· Ongoing waivers. Waivers of this type are used to waive all charges for a given assessment / debt category.
A waiver is typically added in pending status allowing a user to configure the attributes of the waiver such as the assessment and the amount, if applicable or the effective dates, if applicable. The waiver has no financial effect at this time.
When the user is happy with the waiver's setup and activates it, the obligation's penalty and interest is recalculated.
For any penalty and interest charge that is waived, an adjustment is created for the waived amount (to credit the charge being waived). This information is visible on the waiver portal.
Controlled by configuration. The actual behavior of the waiver and its lifecycle are controlled by the configuration of the waiver. The above information describes the logic provided for waivers in the base product. Your implementation may introduce a different business process.
If a waiver was created in error or created incorrectly, it may be canceled. At this point the obligation's penalty and interest is recalculated to cancel the waiver financial transactions.
Controlled by configuration. The actual behavior of the waiver and its lifecycle are controlled by the configuration of the waiver. The above information describes the logic provided for waivers in the base product. Your implementation may introduce a different business process.
A waiver log contains an entry for every recorded event during the lifecycle of a waiver. There are two general types of log entries:
· Automatic entries. The system automatically creates an entry in the log when a waiver is created or there is a status change or when a related entity is created. This also includes any implementation-specific log entries. Users cannot modify or delete these log entries.
· Manual entries. Users can add manual entries to record significant events at their discretion.
Use the Waiver transaction to view and maintain pending or historic waivers. Navigate using Main Menu, Financial, Waiver.
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Use the query portal to search for a waiver. Once a request is selected, you are brought to the maintenance portal to view and maintain the selected record.
This portal appears when a waiver has been selected from the Waiver Query portal.
The topics in this section describe the base-package zones that appear on this portal.
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This is a standard actions zone.
If the activity request is in a state that has valid next states, buttons to transition to each appropriate next state are displayed.
The Waiver zone contains display-only information about the selected waiver.
Please see the zone's help text for information about this zone's fields.
This info zone displays all existing adjustments that have the same Assessment Id and Debt Category as the waiver being displayed.
This info zone displays all existing waiver adjustments created for this waiver.
This is a standard log zone.