Years ago, when you first looked at your tax debt, you thought you might be able to pay it off one day. Unfortunately, once your finances got better, you discovered your tax debt had grown dramatically. One of the reasons for this is that IRS interest grew while you waited for your income to improve. This page will give you an understanding of what IRS interest does to your tax debt and what you can do about it.
How IRS Interest Adds UpIRS interest is a yearly percentage added onto your tax debt. It adds up every day that your tax debt goes unpaid. Until your entire tax liability is paid, your IRS interest will continue to accrue. This means that the tax debt you saw on the last letter you just received from the IRS is probably already outdated.
The percentage can change every three months. It has been as high as 16 percent in the past. In the last few years, the IRS interest rate has fluctuated from 3 to 8 percent. If your tax debt has been around that long, it has grown in a wide range of spurts.
What to Do About IRS InterestEvery time that you are levied or you make a payment, you may notice that a large portion of what was collected went toward your IRS interest and not the tax debt itself. So, how will you ever get your tax debt paid in full and end the agonizing cycle? There are a few solutions to IRS interest that you may want to consider. You may have heard about penalty abatement already. In certain circumstances, you may also be able to abate IRS interest for the two following reasons.
- That tax period, you were the victim of a disaster or military/ terrorist action.
- A delayed ministerial or managerial act kept you from resolving your debt quickly.
If either of these conditions applies to you, fill out a Form 843 to request abatement on IRS interest. You can even request to have IRS interest abated that you have already paid for. This must be done within three years of filing your original return or two years of paying the IRS interest, whichever is later.
If you do not qualify to get IRS interest abated, your only option is to pay your tax debt as quickly as you comfortably can. If you need help figuring out how to do this, consult a professional. Call now or fill out the form below for a free tax debt consultation on how you can lower your IRS interest! We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.