Managing Tax Underpayments: Understanding IRS Interest Rates and Exploring Cost-Effective Solutions
Image created by Gemini AI
The IRS announced that the interest rates on tax underpayments (i.e., taxes owed but not fully paid) for the fourth quarter of 2024 will remain at 8%, starting from October 1, 2024. This means that the rates for the rest of the year will stay the same as those in the third quarter of 2024.
This high interest rate on the owed tax amount is significant, especially considering that taxpayers with unpaid taxes also accrue late payment penalties, and some may also accrue late filing penalties. It's important to remember that the IRS calculates interest on the penalties as well.
In today's market, many taxpayers can obtain a bank loan with an interest rate between 7% and 8%. Given this, if a taxpayer has no other viable options to resolve the unpaid tax but to pay the balance in full and has the ability to borrow money from the bank, it is most cost-effective to pay the unpaid tax debt with the funds borrowed from the bank and continue making lower payments to the bank rather than the IRS.
In case you have any questions about resolving your tax balance or need assistance in understanding your options, feel free to contact Olena. She has extensive experience in tax matters and can provide valuable guidance tailored to your specific situation. Remember, it's crucial to address any tax-related concerns promptly to avoid further complications.
Olena Ruth | Tax Defense Attorney
Olena represents the taxpayers in federal and state tax audits, collection matters, administrative appeals, and the U.S. Tax Court’s cases. She is actively engaged in Tax Sections of the American Bar Association and Colorado Bar Association. She serves as Colorado Bar Association’s pro-bono attorney and liaison to the Internal Revenue Service. Her speaking engagements include presentations on tax matters in family law, employment tax issues, and communication with the IRS.
Olena can be reached at olena@ruthtaxlaw.com
