Interest Charges
You have IRS problems if you settle your taxes late or don’t settle at all. The unpaid tax is considered by the IRS as borrowed money, therefore, you’re charged interest on your unpaid taxes, as mandated by the U.S. Congress. Furthermore, you are also charged penalties for late payment.
The IRS punishes you for not paying your taxes on time with penalties and interest. Interest starts accumulating when the tax is due, not when it is determined to be owed. This interest is based on the balance, including whatever penalties assessed, and is compounded daily. With the rate it’s going, it won’t take long for the bill to double, or even triple!
It does not matter why you have late/unpaid taxes because you will still be charged interest. Interest will still increase for the amount of taxes unpaid, even for a simple mathematical error. Unless the IRS receives full payment, interest will not stop growing. Interest is posted quarterly but compounded daily. It can go from 4-10% per annum.
The first thing you need to do is request a detailed penalty and interest printout. The explanation will show you: 1) lists of all your tax penalties and interest computations; 2) dates, interest rates, penalties assessed, and credits for payments or refunds; 3) interest and penalty charges on tax amounts; 4) penalties that were already applied; 5) account summary reflecting amount due, which will include up-to-date penalty and interest amounts.
Interest may be reduced or cancelled if you are eligible for an Offer in Compromise. Due to IRS delays or if applied in error can only be instances when interest is abated or cancelled. Our company can help you determine if the penalties and interest being charged to you are correct.
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