If you have taxes that you have not yet paid, you have an obligation to pay them as soon as possible. The IRS is required by statute to charge interest on this overdue bill for each day that you do not pay, which will quickly add up. Taxpayers who have concerns about IRS interest on unpaid taxes in Washington DC should consult a tax lawyer from Pontius Tax Law to discuss their best options for coming into compliance.

How the IRS Charges Interest

The IRS charges interest on a daily basis, from the due dates of the tax returns until the date a taxpayer has paid in full or resolved the matter in some other way. The interest rate is determined by taking the quarterly federal rates and adding 3% onto it. Taxpayers can view the quarterly interest rate for various quarters and years on the IRS website.

There is no way to alter the rate of interest – it is statutorily required by the Internal Revenue Code. However, the total interest will be reduced if the underlying tax and penalties is reduced, because that interest is based upon those two items. There is no option for a taxpayer in Washington DC or elsewhere to request a reduction, abatement, or relief in interest that is assessed on their unpaid taxes.

What Happens if an Unpaid Balance Remains on a Taxpayer’s Account?

If a taxpayer’s account has unpaid balance, the interest and penalties will continue to accrue until the balance is either fully paid or resolved through another resolution option. If it remains unpaid, the IRS could begin taking enforcement collection actions such as tax levies, which usually involves garnishing wages from bank accounts, or by implementing liens with security interest against taxpayer property, such as their home.

Interest Assessments

Interest assessments are additions to the IRS balance based upon the underlying balance due. The assessment of interest occurs when the IRS formally calculates the interest payments and puts it onto the account transcript.

Calculating interest is usually done by computer software, and it can be complex because it is based upon the tax and penalties that are due. The other variable that comes into play is that the interest rate itself is based upon the quarterly federal tax rate, which can change frequently.

Formally, the IRS is assessing interest compounding daily. However, what typically happens in practice is that they update the transcripts every month. Periodically, the IRS will mail letters to the taxpayer with the current amount due for their unpaid taxes, including both tax penalties and interest.

What Are Under-Refunds of Credit Interest?

Under-refunds of credit interest happen when the IRS has delayed refunds to the taxpayer beyond 45 days and they are required to pay the taxpayer interest on the money that was overpaid to the IRS.

The IRS could be liable for an overassessment of tax penalties, interest, et cetera, in the sense that they would make a refund to the taxpayer of the overpayment of tax and remove any types of refund or penalties paid that were not applicable. They would also refund any interest payments that were made, as well as pay the taxpayer interest on the total amount that was incorrect and overpaid. But practically speaking, the IRS is not going to pay a penalty to itself, as would generally happen if the situation were reversed and the taxpayer had underpaid.

See How a DC Attorney Could Help You with IRS Interest on Unpaid Taxes

The longer you take to pay your tax bill to the federal government, the more money you will end up owing them. It is important that you quickly address IRS interest on unpaid taxes in Washington DC by resolving the underlying debt itself. Reach out to our law firm for a consultation.

Attorney John Pontius

Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC,  Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.

Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.

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John helped us with a DC tax audit and succeeded in getting us a "no change" final decision. The issues were related to two flow-through entities and the use of carry-forward operating losses -- something that the DC auditors struggled to understand and with which they did not have any...
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Mr. Pontius is extremely professional and was able to take care of my tax returns which includes international bank accounts quickly and at a very reasonable price. Would definitely recommend.
I received a fee this past November from the IRS for over $800 because of an error I made on my 2016 taxes. I called my cousin, John Pontius, and he immediately knew what steps needed to be taken. Thanks to him, the fee was cleared. A 10 minute conversation...
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