What Interest Rate Does The IRS Charge?

When you pay your taxes late, the IRS looks at it as if you are borrowing their money and they will want to charge you interest for borrowing their money. We will show you how to minimize the interest charged to you.

Overview of IRS Interest Rates

Interest rates paid on delinquent taxes are set by Congress and they can be adjusted four times per year. The current interest rates are hovering between 3% and 6%.

The interest you pay on your taxes is based on the federal short–term rate + 3%.

Interest Abatement

Most delinquent taxpayers will not qualify to abate (reduce or remove) their interest under the abatement program.

Abatement of interest is available only:

  • If the IRS is at fault or makes a mistake
  • If interest is charged because of IRS delays
  • If you were living in a disaster area at the time your tax payment was late
  • The IRS does not let you know that you owe more tax
Interest Abatement

How To Not Pay Interest

In many situations, what Interest Rate Does The IRS Charge is not the most important factor to consider. The simplest way to not to pay interest on your delinquent taxes is to use one of the programs that the IRS offers to resolve your taxes for less the full amount owed. The two most common are the Offer In Compromise and the Installment Agreement program.Read more

Here is an example
Delinquent Taxes Owed: 22,000
Interest: $2,400
Penalties: $5,000
Total Tax Bill: $29,400
   
Approved Repayment Amount: $5,500
 

As you can see from this example, the amount of the approved settlement is less the original delinquent tax amount. Not only does the hypothetical taxpayers not have to pay the full amount of the delinquent taxes, but he/she does not have to pay the interest that was charged as well. While technically they did not qualify for an interest abatement, they were still able to settle their back taxes without having to pay any interest.

This is a technique that can potentially work for you. In order to find out if you qualify to use this repayment program, you must apply the IRS’ repayment formulas to your current financial situation. Only after you have completed this step will you be able to understand which repayment program will work best for your specific situation and for how much you will be able to settle your delinquent tax debt.

To find out more on how our program can help you determine your eligibility and repayment amount we encourage to start with our Pre-Qualifier. It’s FREE and we don’t ask for your credit card, date of birth or social security number.

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