Internal Revenue Service raises interest rates for late tax payments

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The last thing taxpayers want to do is pay more money than necessary to the Internal Revenue Service (IRS).

But late filing of tax returns could result in higher payments. The financial consequences will be more severe this year than last.

According to Fox Business, IRS interest rates will increase for the calendar quarter beginning April 1.

“The rate will increase to 4% for overpayments and 3% for businesses, 1.5% for the portion of a business payment over $10,000, 4% for underpayments and 6% for underpaid companies,” Fox Business reported. “For non-corporate taxpayers, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.”

Compound interest

Especially for those flirting with the April 18 Tax Day deadline, keep in mind that taxpayers owe interest on any unpaid taxes from the due date of the return until the date of payment. . Plus, interest is compounded daily.

According to CNN Business, “you’ll want to do everything possible to avoid getting hit with tax and interest penalties if you end up owing money to the IRS on your 2021 tax return.”

CNN Business also wrote that “even a relatively small balance owing can swell quickly.”

For example, if someone owes the IRS $1,000 but doesn’t file or pay the money for six months after the original due date, that bill could add up to at least another $600. .

“Regardless of when you file your tax return, if you don’t pay the tax you owe by the tax filing deadline, IRS penalties can be severe. The IRS will charge you half a percent each month on the amount of tax you still owe after the deadline,” writes TurboTax. “If you don’t file by the extension date, the IRS penalty increases to 5% per month, for a maximum penalty of 25%.”

Filing of an extension

Taxpayers have one option is to file an extension, but that does not mean that what they owe the IRS is put on hold.

“The IRS gives you an automatic extension to file your taxes each year, as long as you file Form 4868,” TurboTax explains. “Common reasons for requesting an extension include lack of organization, unforeseen events, or tax planning goals. Even if you get an extension to file, you still have to pay your income tax in full by the filing deadline. ‘taxation.

In the worst case, you don’t file a tax return at all and you don’t pay what you owe. For this, they will be subject to both the production defect fee and the late payment penalty.

Ethen Kim Lieser is a Washington State-based science and technology editor who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow him or contact him on LinkedIn.

Picture: Reuters.

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