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Interest for Individuals

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When do we charge interest?

The IRS generally charges interest on any unpaid balance.

  • We charge interest on tax, penalties, and interest until the balance is paid in full.
  • Interest accumulates daily.
  • Interest stops accruing as soon as you pay your balance in full.
  • The interest rate is determined every three months (quarterly). This doesn’t change the interest rate for prior quarters or years.
  • Interest on the failure to file penalty, also called the delinquency penalty, starts on the return due date, including any extension of time to file.
  • Interest on the failure to pay, estimated tax, and dishonored check penalties starts on the notice date of that penalty amount.
  • Interest on penalties related to the accuracy of your tax liability starts on the return due date, including any extension of time to file.

 

When do we pay interest?

  • If you file your return on or after April 15, IRS has an administrative time (typically 45 days) to process your return without paying interest on your refund.
  • Your return must be complete and signed.
  • If IRS pays you interest, then interest on the refund will start on the return due date, late filed return received date, or date the payment was made, whichever is the latest.
  • The return due date is generally April 15.


 

 

Interest start date

Interest will start on April 15, if your return shows you owe tax. An extension of time to file is NOT an extension of time to pay. If April 15 is on a weekend or holiday, your return will be considered timely filed and paid, as long as you file and pay by the next business day.

Payment on notices

If you received a notice, interest will stop being charged on the amount shown on your notice, if you fully pay the amount you owe before the “pay by” date.

Payments are applied first to tax, then to penalties, and finally to interest.

Partial payment

If you can’t pay your entire balance, pay what you can now. You can enter into an Installment Agreement to pay the remaining balance.

With an installment agreement the failure to pay penalty rate may be reduced.

Interest will continue to accrue daily on any amount not paid, including on both penalties and interest.

Interest reduction

If any of your tax and/or penalties are reduced, we will automatically reduce the related interest.

The IRS doesn’t remove or reduce interest for reasonable cause or as first-time relief. Interest is charged by law and will continue until your tax account is fully paid.

The IRS may only reduce the amount of interest you owe if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act.

Use Form 843 to request a reduction in interest. See Instructions for Form 843 and IRC Section 6404(e)(1) for additional information.

Telephone assistance

If you have a notice, call the number listed on the top right hand side of the notice. Otherwise, you may call, 1-800-829-1040. See telephone assistance for additional information. Please have your paperwork (such as cancelled checks, amended return, etc.) ready, when you call.


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Page Last Reviewed or Updated: 19-Oct-2016