You’re chilling on a Saturday, maybe planning a trip to Naivasha, when your phone pings. It’s an email from KRA. Your heart sinks. It’s a penalty notice, and the amount is giving you instant headache. Sound familiar? You’re not alone.
This article breaks down exactly why KRA is sending you penalty notices in plain language. More importantly, we’ll give you a clear, step-by-step guide on what you can do about it. No legal jargon, just practical steps you can take right now from your phone.
Common Reasons Why KRA Sends Penalty Notices
KRA doesn’t just wake up and decide to send penalties. It’s usually triggered by a specific action—or inaction—on your part. Understanding the “why” is the first step to fixing it and avoiding future trouble.
1. Late Filing of Returns
This is the big one. Whether it’s your monthly VAT, your annual income tax, or PAYE for your employees, missing the deadline is a guaranteed ticket to Penalty Town. The due dates aren’t suggestions; KRA’s iTax system automatically flags late submissions.
For instance, the deadline for filing and paying VAT is the 20th of the following month. Forget during the busy December season? Penalty. The system calculates it daily, so the longer you wait, the more it grows.
2. Late Payment of Taxes
You filed your return on time—good job! But did you actually pay the tax you declared? Filing and paying are two different steps. If the money doesn’t hit KRA’s account by the deadline, you’ll get a notice for the unpaid balance plus penalties and interest.
This often happens with people who file via their phones but forget to complete the M-Pesa or bank payment step. Always get that payment confirmation receipt.
3. Under-Declaring Income or Over-Claiming Expenses
KRA’s data matching is getting smarter. They can compare your declarations with info from your employer, banks (via CRS), and even your M-Pesa statements. If you run a side hustle in Westlands selling sneakers and don’t declare that income, a mismatch can trigger an audit and subsequent penalties.
Over-claiming expenses, like saying your entire family holiday in Diani was a business trip, is a red flag. Be honest and keep receipts.
4. Failure to Register for a Tax Obligation
Your small online business is picking up. You’re making good money from Instagram orders. Once your turnover hits Ksh 5 million annually, you’re required by law to register for VAT. If KRA discovers you’ve crossed that threshold without registering, they will backdate penalties from when you should have registered.
Ignorance of the law is never an excuse they accept.
What to Do When You Get a KRA Penalty Notice
Don’t ignore it. Don’t throw your phone. Take a deep breath and follow these steps. Acting fast can save you a lot of money and stress.
Step 1: Log into iTax and Verify the Details
First, confirm it’s real. Log into your iTax dashboard (not via any email link—type the address yourself). Go to the “Notices” section. Check the assessment notice, penalty notice, and the specific tax head (VAT, Income Tax etc.).
Verify the period, the amount of principal tax, the penalty, and the interest. Make sure it’s actually yours and not an error.
Step 2: Pay the Principal Tax Immediately (If You Haven’t)
If you haven’t paid the original tax, do that NOW. Penalties and interest are calculated on the principal tax and stop accruing once it’s paid. Use the correct KRA paybill number (572572) and your KRA PIN as the account number.
Even if you dispute the penalty, paying the principal tax shows good faith and stops the financial bleeding.
Step 3: Consider Objecting or Applying for Waiver
If you have a genuine reason for the delay, you can object or apply for a penalty waiver. Valid reasons include: a documented system failure on iTax, a serious illness with medical records, or a natural disaster. “I was busy” or “I forgot” won’t cut it.
You must file an objection within 30 days of the notice. On iTax, navigate to “Objection” under the specific tax head, state your case clearly, and attach supporting documents (like screenshots of iTax errors or hospital letters).
The Kenyan-Specific Reality: Dealing with KRA Offices
Sometimes, you can’t solve it from your phone. You might need to visit a KRA Huduma Centre. Here’s the local knowledge you need to navigate this.
First, go early. I’m talking 6:30 AM early if you’re going to the busy Huduma Centre at Posta in Nairobi or along Oginga Odinga Street in Kisumu. The queues are no joke, especially just before the 20th of the month or in the last week of June (end of financial year).
Dress for a long wait and carry all physical documents: printed notices, your national ID, business registration certificates, and your payment confirmation slips. Have both soft and hard copies.
Be polite but persistent with the officers. A little “Samahani, naweza saidia?” goes further than frustration. If you get stuck, ask to speak to a supervisor. Know that for complex waiver requests, you may be referred to the main KRA office like Times Tower, which is a whole different ball game.
Local Tip: If you’re a small business owner, consider using an affordable, licensed tax agent (look for ones registered with the Institute of Certified Public Accountants of Kenya – ICPAK). For maybe Ksh 2,000 to Ksh 5,000 per month, they handle all filings and correspond with KRA on your behalf, saving you these headaches.
How to Stop Future Penalty Notices for Good
Prevention is better than cure, and cheaper too. Set up systems so you never have to deal with this panic again.
Set Calendar Reminders (With Kenyan Dates)
Mark all KRA deadlines in your phone calendar with multiple alerts. Key ones are:
- 20th of every month: VAT filing & payment.
- Last day of every month: Monthly Rental Income Tax (if applicable).
- 30th June: Annual Income Tax Return (for the year ended 31st Dec).
- 20th January: Provisional Tax (if you are required to pay).
Set the first reminder for the 15th of the month to give yourself a buffer.
Use the KRA Mobile App & M-Pesa
The KRA M-Service app is a lifesaver for mobile-first Kenyans. You can file returns, make payments via M-Pesa (Paybill 572572), and view statements anytime. Link your M-Pesa to iTax for seamless payments. The convenience is worth it.
Keep Impeccable Records
Get a simple spreadsheet or use a local app like Pastel. File all your receipts, invoices, and bank/M-Pesa statements monthly. When the time comes to file, everything is in one place. This also protects you if KRA questions your deductions.
Conclusion
Getting a notice from KRA is stressful, but it’s a solvable problem. The key is to understand why KRA is sending you penalty notices—usually due to late filing, late payment, or under-declaring. Your action plan is simple: verify the notice on iTax, pay any outstanding principal tax immediately, and if you have grounds, file a formal objection with evidence.
The best strategy is to get proactive. Set those calendar reminders, use the KRA app, and keep your records straight. It saves you money, time, and that awful sinking feeling when the email arrives. Got a specific question about your penalty? Share your experience in the comments below—let’s help each other navigate this.