If you file your return before the due date and request an installment agreement, the rate of half of one percent is reduced to a quarter of one percent for any month when an installment payment agreement is in effect. Keep in mind that the IRS applies the tax payments first, then any penalties and then interest. When you have an installment payment agreement, the penalty for non-payment is halved. The interest rate on the installment payment agreement drops to 0.25%.
Interest and penalties for non-payment will continue to accrue until the full balance of outstanding taxes is paid in full. But don't assume that a payment plan is your best option, as there are obvious drawbacks. The most important is that interest and penalties continue to accrue while you are still in debt. Combined with fines, the interest rate usually ranges from 8 to 10% per annum.
It's possible to pay for years and owe more than when you started. You should talk to a Polston tax attorney who can thoroughly inform you about your tax rights and determine the debt repayment options available to you. They can also investigate the details of your tax case and negotiate directly with the IRS to get the best outcome for your situation. Many installment payment agreements with the IRS require additional fees to establish plans and organize payment methods.
If the IRS agrees that you are having financial difficulties, it may consider that your account is currently uncollectible and you can delay payment until your finances improve. These agreements require a number of established criteria, from having payments withdrawn directly from your bank account to charging you interest each month on the remaining balance. The interest rate of the IRS repayment plan is equal to the federal short-term rate, which the agency sets as a minimum interest rate for loans, plus 3 percent, rounded to the nearest integer percentage. Some taxpayers may qualify for a compromise offer, in which the IRS settles their tax debt for less than the total amount they owe.
However, if you decide to pay the installment agreement fees with a credit or debit card, the three payment processors approved by the IRS do charge a fee, which usually ranges from 1.87% to 1.98% to process these types of payments. They make sure that the IRS gets all your money, which makes them happy, and prevents them from charging you fines, interest, penalties and even the down payment that comes with choosing a payment plan. The interest rate that applies to late tax payments differs substantially when you have an installment agreement with the IRS. Skipping more than one payment can even cause the IRS to comply with the taxes it has imposed on any of your properties and bank accounts.
If the IRS determines that a taxpayer cannot pay, it can delay collection until their financial situation improves. Once again, just talking about climbing can cause a change in attitude on the lower rungs and get a fair payment plan. Not being able to pay the taxes you owe the IRS is stressful and it can be difficult to choose which option is best for paying off your balance. If you have a larger tax debt and need more time to pay it off, you should always set up a long-term repayment plan.