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What You Need To Know About IRS Bills, Penalties And Interest Charges

Many people want to know what they are up against for failing to file and or pay by the tax deadline of April 15th so here are some things for you to consider.

1.         Federal income tax returns are systematically checked for mathematical accuracy. If there is any money owed, you will be sent a bill. So don’t worry so much about math errors on the federal tax return as it will be caught. Generally speaking if you catch a math error after the tax return was submitted it can make sense in many instances to wait for the IRS to contact you with the changes before going through the brain damage of filing an amended federal income tax return. The tangible cost incurred for waiting will be the assessed penalties and interest for the difference between the original underpayment and the actual balance owed.

Keep in mind too that a math error on a federal tax return will also impact your state income tax return and various states react differently to errors. So you will want to reach out to your state department of revenue with any necessary adjustments as soon as they are discovered.

2.         Interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate, determined quarterly is the federal short-term rate plus 3% compounded daily. This in and of itself is not so onerous however when penalties are added in a $10,000 balance due can jump up to $15,000 in approximately 5 months.

3.         If you file a return but don’t pay all amounts shown as due on time, you will be subject to pay a late payment penalty. This penalty is on the amount of tax due at the rate of one-half of one percent for each month, or part of a month, up to a maximum of 25%, on the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. If you file by the return due date, the one-half of one percent rate decreases to one-quarter of one percent for any month in which an installment agreement is in effect.

4.         If you owe tax and don’t file on time, you will be subject to a total failure to file penalty. The total failure to file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to five months. If your return is over 60 days late, the minimum penalty for late filing is the lesser of $135 or 100% of the tax owed.

5.         You must file your return and pay your tax by the due date to avoid interest and penalty charges. Be mindful that the effective rate of accruals with the IRS can be as high as 8% per annum. Often times the funds necessary to pay your tax can be borrowed at a lower effective rate than the combined IRS interest and penalty rate.

6.         Properly identify each payment you are making. To ensure your payment on a bill for tax is credited properly, be sure to return the tear-off stub on your bill. Make your check or money order payable to the United States Treasury. Do not make your check payable to Internal Revenue Service as it will likely be returned by the government to you. Enter the primary social security number or employer identification number, the tax year and form number, and your telephone number on your check or money order. Do not send cash.

What Should You Do?

If you believe there is an error on your notice or bill, do not assume that the IRS will discover this on their own. The IRS will not and will continue their efforts to aggressively collect the money they say is due. Instead, enlist the services of a qualified tax attorney to resolve these errors. There are circumstances where penalties can be abated if you have reasonable cause and the failure was not due to willful neglect. Working with a tax attorney lawyer at the Law Offices Of Jeffrey B. Kahn, P.C. with offices in Los Angeles, San Diego, San Francisco and elsewhere in California is the best way to assure that your account is corrected, and penalties are abated and that you get a payment plan or settlement that works for your situation and prevents IRS collection action to be taken against you.

Description: Working with an IRS lawyer to resolve errors in your IRS notice or bill and set up a payment plan can help you avoid a tax levy and other IRS collection actions.

    Request A Case Evaluation Or Tax Resolution Development Plan

    Get a Tax Resolution Development Plan from us first before you attempt to deal with the IRS. There are several options for you to meet or connect with Board Certified Tax Attorney Jeffrey B. Kahn. Jeff will review your situation and go over your options and best strategy to resolve your tax problems. This is more than a mere consultation. You will get the strategy or plan to move forward to resolve your tax problems! Jeff’s office can set up a date and time that is convenient for you. By the end of your Tax Resolution Development Plan Session, if you desire to hire us to implement the strategy or plan, Jeff would quote you our fees and apply in full the session fee paid for the Tax Resolution Development Plan Session.

    Types Of Initial Sessions:

    Most Popular GoToMeeting Virtual Tax Development Resolution Plan Session
    Maximum Duration: 60 minutes - Session
    Fee: $375.00 (Credited if hired*)
    Requires a computer, laptop, tablet or mobile device compatible with GoToMeeting. Please allow up to a 10-minute window following the appointment time for us to start the meeting. How secure is GoToMeeting? Your sessions are completely private and secure. All of GoToMeetings solutions feature end-to-end Secure Sockets Layer (SSL) and 128-bit Advanced Encryption Standard (AES) encryption. No unencrypted information is ever stored on our system.

    Face Time or Standard Telephone Tax Development Resolution Plan Session
    Maximum Duration: 60 minutes - Session
    Fee: $350.00 (Credited if hired*)
    Face Time requires an Apple device. Please allow up to a 10-minute window following the appointment time for us to get in contact with you. If you are located outside the U.S. please call us at the appointed time.

    Standard Fee Face-To-Face Tax Development Resolution Plan Session
    Maximum Duration: 60 minutes - Session
    Fee: $600.00 (Credited if hired*)
    Session is held at any of our offices or any other location you designate such as your financial adviser’s office or your accountant’s office, your place of business or your residence.

    Jeff’s office can take your credit card information to charge the session fee which secures your session.

    * The session fee is non-refundable and any allotted duration of time unused is not refunded; however, the full session fee will be applied as a credit toward future service if you choose to engage our firm.