Dealing with Interest Charges

You have IRS problems if you settle your taxes late or don't pay at all. The unpaid tax is considered by the IRS as borrowed money, therefore, you're charged interest on your unpaid taxes, as required by the U.S. Congress. Not only that, you're also subjected to penalties for late payment.

Charging penalties and interest on unpaid taxes is supposed to be part of the punishment the IRS imposes on you for not paying taxes on time. Interest starts accruing when the tax is due, not when it is computed. The balance includes assessed penalties that are compounded on a daily basis and interest charged on it. Your bill will double or triple before you know it at this rate.

Whether it's deliberate or a mathematical error, you will still be charged interest, regardless of why you have late/unpaid taxes. Compounded on a daily basis and posted quarterly, interest may go from 4% to 10%, and won't cease to accrue until payment is made.

You can ask for documentation detailing the penalties and interest your tax debt is accruing and it'll contain: 1) tax penalties and interest computations; 2) credits for refunds or payments, as well as interest rates, dates, and penalties assessed; 3) tax amount charges, both penalties and interest; 4) applied penalties; 5) balance due shown on account summary, with updated interests and penalties.

Let our office help you wade through this form and figure out if you truly need to pay the penalties and interest you are being charged. Unless it was erroneously applied or is due to their delays, interest is often never abated or cancelled. If you are eligible for an Offer in Compromise, your interest may be reduced or cancelled altogether.

Darrin T. Mish is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He teaches attorneys, CPAs and Enrolled Agents in the finer aspects of IRS representation all around the United States. He can be reached at his website at http://www.getIRShelp.com