|FAQ Keyword 190
||2006 Tax Year
Keyword: Tax Bill/Debt/Liability
I'm concerned because my check for payment to the IRS has not been
cashed yet. What should I do?
If it had been at least two weeks since the payment was sent to IRS, you
can call (800) 829-1040 and ask an IRS representative if the payment has been
credited to your account. If the payment has not been credited and your check
has not cleared your financial institution, you may choose to place a stop-payment
on the original check and send another payment.
I am unable to pay my delinquent taxes. Will the IRS accept an Offer
You may qualify for an Offer in Compromise if you are unable to pay your
taxes in full or if you are facing severe or unusual economic hardship. Refer
to Tax Topic 204, Offers in Compromise, for additional information.
Is there any special assistance available on unresolved tax matters
which are creating a hardship?
If you are suffering, or about to suffer a significant hardship because
of the way Internal Revenue laws are being carried out, you may ask for special
help from the IRS' Taxpayer Advocate Program. The Taxpayer Advocate represents
your interests and concerns within the IRS by protecting your rights and resolving
problems that have not been fixed through normal channels. You can reach that
office by dialing (877) 777-4778.
Can I make installment payments on the amount I owe?
Yes. If you cannot pay the full amount due as shown on your return, you
can ask to make monthly installment payments. However, you will be charged
a one time user fee of $43.00, as well as interest on any tax not paid by
its due date, and you can be charged a late payment penalty unless you can
show reasonable cause for not paying the tax by the due date (April 16, 2007
for individual income tax returns) even if your request to pay in installments
is granted. Before requesting an installment agreement, you should consider
less costly alternatives such as a bank loan.
To request an installment agreement send Form 9465 (PDF), Installment Agreement Request, with your return or
call (800) 829-1040. You should receive a response within 30 days. For more
details on installment payments, refer to Tax Topic 202, What to
do if You Can't Pay Your Tax, or Publication 594 (PDF), Understanding the Collection Process.
What kind of penalties and interest will I be charged for paying
and filing my taxes late?
Interest, compounded daily, is charged on any unpaid tax from the due date
of the return until the date of payment. The interest rate is the federal
short-term rate plus 3 percent. That rate is determined every three months.
For current interest rates, go to News
Releases and Fact Sheets and find the most recent Internal Revenue release
entitled Quarterly Interest Rates.
In addition, if you filed on time but didn't pay on time, you'll generally
have to pay a late payment penalty of one-half of one percent of the tax owed
for each month, or part of a month, that the tax remains unpaid after the
due date, not exceeding 25 percent. However, you will not have to pay the
penalty if you can show reasonable cause for the failure. The one-half of
one percent rate increases to one percent if the tax remains unpaid after
several bills have been sent to you and the IRS issues a notice of intent
Beginning January 1, 2000, if you filed a timely return and are paying
your tax pursuant to an installment agreement, the penalty is one-quarter
of one percent for each month, or part of a month, that the installment agreement
is in effect.
If you did not file on time and owe tax, you may owe an additional penalty
for failure to file unless you can show reasonable cause. The combined penalty
is 5 percent (4.5% late filing, 0.5% late payment) for each month, or part
of a month, that your return was late, up to 25%. The late filing penalty
applies to the net amount due, which is the tax shown on your return and any
additional tax found to be due, as reduced by any credits for withholding
and estimated tax and any timely payments made with the return. After five
months, if you still have not paid, the 0.5% failure-to-pay penalty continues
to run, up to 25%, until the tax is paid. Thus, the total penalty for failure
to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the
tax owed. Also, if your return was over 60 days late, the minimum failure-to-file
penalty is the smaller of $100 or 100% of the tax required to be shown on
Also, refer to Tax Topic 653, IRS Notices and Bills and Penalty
and Interest Charges.
Can my refund be used to pay other debts?
Under the law, state and Federal agencies refer to the IRS the names of
taxpayers who are behind in their support payments, taxes, and loans. Your
tax refund may not be refunded to you if you are delinquent in child or child
and spousal support payments, have a past due Federal debt (such as a student
loan), or owe state income taxes. Therefore, your refund will be used to pay
other debts you owe. For additional information, refer to Tax Topic 203, Failure
to Pay Child Support and Other Federal Obligations.
Can a person receive a tax refund if they are currently in a payment
plan for prior year's federal taxes?
As a condition of your agreement, any refund due you in a future year will
be applied against the amount you owe. Therefore, you may not get all of your
refund if you owe certain past-due amounts, such as federal tax, state tax,
a student loan, or child support. The IRS will automatically apply the refund
to the taxes owed. If the refund does not take care of the tax debt; you must
continue the installment agreement.
Is the interest amount that we paid to the IRS deductible?
Interest and penalties paid to the IRS on Federal taxes are not deductible.
For more information, refer to Items You Cannot Deduct in
Chapter 25, Interest Expense, in Publication 17, Your Federal Income
Tax for Individuals; and Tax Topic 505, Interest Expense.
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