If you have a balance with the IRS, that balance will be subject to a monthly late penalty, interest, and possible fines. As a result, if not addressed quickly, your balance with the IRS can grow to unmanageable levels very quickly. It’s critical to talk to the IRS or your tax attorney as quickly as possible. Interest on late taxes is compounded daily on any unpaid tax from the due date of the return until date of payment. The interest rate is the federal short term interest rate plus 3 percent. The interest rate is determined every three months. You can check the IRS website to find the current interest rate.
In addition, if you don’t pay your tax return on time, you will generally have to pay a late penalty which is one half of one percent (0.5%) of the tax owed for each month, or part of the month that remains unpaid after the due date up to 25%. If you can show a reasonable cause for failure the IRS can waive the penalty. Contact the IRS or your tax attorney as soon as possible to avoid accruing these penalties. If, after several bills have been sent to you and the tax remains unpaid, the fee will double to one percent and the IRS will issue a notice of intent to levy. However, if you filed a timely return and are paying your tax via an installment agreement, the penalty is halved to a quarter of one percent (0.25%).
If you did not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause. The combined penalty is 5 percent (4.5% late filing, 0.5% late payment) for each month or part of month that your return was late up to 25%.The total failure. The total penalty to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed. If you feel a penalty or interest has been assessed in error you have rights as a tax payer to challenge the IRS findings. The IRS can also help structure a payment plan or make special accommodations for sufficient cause. Please talk to your tax lawyer for more information. To learn more about our services, call 913-735-4829 to speak to a tax attorney.
