IRS Charges Interest On Back Taxes

The IRS Charges Interest On Back Taxes

 The IRS Interest Rate is currently 3% compounded daily.

While there are many different interest penalties involved with balances due depending on the collecting tax agency, the IRS’s interest calculations are mostly straightforward. Once the IRS has received your return, they check all US tax returns for mathematical accuracy. If they find an error in your return and you have either overpaid or underpaid your taxes, they will send you a notice. If you have received a notice and are looking for more information about what it means, look for Richard Schickel’s book on Kindle it is called What to Do When The IRS is After You– it lists all of the notices and what they mean.

If the IRS finds that you have a balance due, they can charge interest on the unpaid tax, determined by the balance due from the date of the return to the date of the payment. This interest rate, determined quarterly, is the combination of the federal short-term rate plus 3% and is compounded daily. When you file your return, if you do not pay all of the balance due you will be charged a late payment penalty which is .5% of the tax owed for each month, or part thereof, until the tax is paid in full, with a maximum penalty of 25%. This half percent penalty will increase to 1% if you have failed to pay your balance in full after 10 days have passed. This 10 day period is also the maximum time for the IRS to submit a notice of intent to levy. If you file your return by the due date, your penalty will be reduced from .5% to .25% for all months which an installment agreement is in effect.

The interest on any amount owed to the IRS adds up quickly so it is important to have it resolved as quickly as possible. The staff at RMS Tax Consulting is experienced in Offer in Compromise and payment plans as well as a wide variety of other tax controversy issues, both civil and criminal, and we would be happy to help you with whatever situation you may be in. Please call Richard Schickel at 520-448-3531.

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