What you owe to the IRS isn't just for your original tax debt; the IRS charges a penalty on the total back tax amount every month. Usually, penalties are charged at 0.5 percent. As a result of the additional monthly fee, what is owed can increase substantially over time.
Along with penalties, the IRS also charges interest on the tax debt. Interest is charged every month that even a portion of the debt goes unpaid. Both penalties and interest inflate the tax debt amount until it is paid in full. It’s vital for taxpayers to remember that the IRS will continue charging both penalty and interest, regardless of whether they’re making payments through an installment plan.
Taxpayers that are not informed about IRS penalties and interest often postpone resolution, leading to a steadily growing liability. Obviously, they end up paying more to the IRS in tax debt in the end. When choosing an installment plan, individuals should consider the additional cost of extending full payment of their tax debt.
In order to avoid paying more to the IRS, taxpayers should resolve their back taxes as early as possible. The IRS has various payment plans for taxpayers of varying means. Regardless of how much is owed, using a professional tax resolution service may provide additional benefits.
Labels: Back Taxes, IRS, Payroll Taxes, Tax Filing, Tax News