How Much Are Paying in IRS Penalties?

Penalties and interest are adding up by the day if you haven't paid the IRS what you owe them. And they're adding up big-time if you haven't filed at all.

Did You File and Not Pay?

If you did, there's interest being compounded daily on what you owe, which is the quarterly federal short-term tax rate, plus 3%. As of this writing, the IRS is charging 8% per year.

In addition to interest, you're also being charged a Failure-to-Pay Penalty, which is .5% of the tax owed for each month. There is no maximum for the failure-to-pay penalty. If you're sent a number of notices from the IRS and you still don't pay, the penalty increases to 1%.

What You Should Do If You Filed and Didn't Pay?

The most obvious answer is to pay the tax debt.?it's better to owe anyone other than the IRS. Why? Because the IRS has more power to collect in 'mean and nasty' ways than any collection agency you'll ever deal with.

So what if you just can't come up with the money? If you just don't have the money, and you cannot get it, there are legal ways to negotiate with the IRS: Be declared Non-Collectible Status.

Have the debt reduced through an Offer-In-Compromise. Set up a monthly installment agreement plan. Set up a partial installment agreement (where you pay less than the total owed). Declare Bankruptcy.

Did You Not File at All?

If you didn't file taxes this past year (or any other year for that matter), you have bigger problems. You still have the interest that's being compounded daily on what you owe - the quarterly federal short-term tax rate, plus 3%.

But the penalty gets really harsh for non-filers -You pay the .5% late payment penalty plus a 4.5% late filing penalty, for a combined penalty of 5% for the first month your return is late.

However, it gets worse: Every month that you don't file - your penalties double?until 5 months when it caps at 47.5% (22.5% late filing penalty + 25% late payment penalty). 47.5%...Ouch. That's double what even some of the worst credit cards would charge.

About the Author

If you are ready to address your situation with the IRS, please call Tax Attorney Mary E. King at (941) 906-7585.

Author (getmejustice). Submitted on Wed, 17 Aug 2011 Time: 6:58 PM

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