What's new at the Iowa DOR: paper filing trends, PTET clarity, and R&D credit transition

By Emily Junker, Tax Advisor at The Capital Collective
ISCPA Taxation Committee

It is always a pleasure meeting with Iowa Department of Revenue (IDOR) leaders at the Iowa Society of CPAs' annual joint legislative and tax committee meeting. This year's conversation touched on paper filing trends, what draws IDOR's attention during audits, improving the language for PTET filers, communicating with software companies, and the new R&D tax credit process that replaces the repealed Research Activities Credit.

Declining paper filings
Kurt Konek, IDOR's Policy Director for Income Taxes, shared that the department received about 50,000 paper-filed returns for tax year 2025, postmarked on or before April 30. Of those, 1,200 are still being reviewed for potential errors, and roughly 300 are expected to result in refunds. Director Mary Mosiman added that this is a significant decrease from three years ago, when there were approximately 100,000 paper filed returns. This decline in paper filings helps both the Iowa Department of revenue and paid preparers with ease of compliance.

Audit triggers
IDOR does not target specific industries for audit. Instead, a newer system flags returns with a high probability of error, and staff keep an eye out for repeat business losses and unreported income through IRS data-sharing. IDOR also has a program to identify non-filers and will reach out to them to make sure they are aware of their requirement to file. Two ongoing areas of concern are "ghost preparers," paid preparers who skip filling out the paid-preparer section, and "poor preparers," whose licensing IDOR has to verify. For these preparers, IDOR takes additional steps to ensure they are completing their CPE and licensing requirements and submitting them to the department.

Clearer PTET data entry
On PTET and estimated payments, feedback from clients and CPAs led IDOR to revise the GovConnect Iowa estimated payment screen. Filers had been entering a quarter-end date rather than the entity's tax year end, so the field now asks directly for the “tax year,” with calendar-year filers entering the applicable year-end date, such as December 31, 202X. If a client's payment still gets misapplied, having an Authorized Representative contact IDOR directly is the fastest way to fix it.

Feedback encouraged
IDOR also asked preparers, again, for feedback on form language and processes, especially anywhere tax software is causing friction. Feedback needs to be submitted by July each year so that it can make it into forms finalized for software companies by August of that same year. One good example that came up: Iowa Form 1125, the farm tenancy exclusion, still isn't supported by at least one major software provider. Since preparers are the ones paying the software companies, IDOR encouraged CPAs to push directly for missing forms year-round.

New R&D tax credit
The department also walked through how the repealed Research Activities Credit is transitioning to the new R&D tax credit. Under the old credit, IDOR audited applications before the IEDA awarded any credits. Now the IEDA determines eligibility and awards credits up front, and IDOR's role shifts to auditing on the back end to confirm the credit was claimed correctly on the Iowa return. There's still a backlog of audits from the old credit, and it will likely take a few more years to clear.

IDOR leaders also mentioned that the state's tax collection gap has improved noticeably under GovConnect Iowa, helped by the Voluntary Disclosure Agreement program, which leans toward outreach rather than penalties when the goal is getting people compliant.

If any of this is relevant to your practice, or you'd just like to be part of these conversations, consider joining the ISCPA Legislative or Taxation committees. As always, it was a great chance to hear directly from state officials and keep building a good working relationship with the Iowa Department of Revenue.