If a taxpayer has a balance due owed on an private tax return, the Irs will add interest to the estimate owed until the balance is paid in full. Commonly interest is expensed on the unpaid balance from the due date of the return until the tax is paid in full regardless of extensions. Often times the addition of penalties and interest can add amounts to the already large tax liability and overwhelm the taxpayer to the point of hopelessness. At that point the taxpayer may plainly ignore the qoute because they cannot pay the estimate due. Taxpayer activity is required in order to avoid further range activity such as a notice of Federal Tax Lien or an Irs Wage Levy. Seeking pro assistance can help taxpayers deal with this astounding situation and navigate the process with a reliance that the outcome will be optimal.
The interest rate on federal tax owed is variable and is adjusted quarterly. It is carefully by taking the federal short-term rate and adding three percent to it. For current interest rates, taxpayers can go to the Irs website and click on the newsroom and find the description relating to the most current interest rate adjustment. Interest is compounded daily and is expensed on all penalties as well except for estimated tax penalties. The Irs will even charge interest on penalties that supervene from accuracy associated issues on a return. Compounding interest daily means that the previous days interest is added to the tax owed and is then used in calculating the interest for the following day. When adding penalties monthly and compounding interest daily these amounts can add significantly to the total estimate owed. Unlike penalty limits there are no dollar limits on interest charges. This means as long as the there is a tax estimate owed there will be interest expensed on that amount. Taxpayers must remember that the Irs also charges interest even if there is an installment business transaction in place.
Under confident circumstances interest may be abated (reduced or eliminated) however the statute allows for itsybitsy arguments to be made in order to accomplish this. Even though the taxpayer may be unable to pay the taxes due when filing a return they should still file or at least invite an extension. Doing so will help minimize penalties which in turn helps to minimize interest charges as well.
As penalties and interest accrue on a taxpayer debt it can growth the total estimate owed to the Irs substantially. If a taxpayer has received an Irs notice and examine for payment or is in the middle of the Irs range Process they should act immediately and seek pro help. According to the Irs they are one of the world's most effective tax administrators and will act accordingly in ensuring that all taxpayers pay their fair share. Retaining competent representation can more than pay for itself in exploring all the options that are open to a taxpayer and ensuring that they receive a resolution that is fair, equitable and in their best interest.
