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IRS tax interest rates remain at 3rd quarter levels

Interest charged by the Internal Revenue Service on late taxes will remain the same for the third quarter of 2009 as it was for second quarter, according to an announcement by the IRS.

“For most small business owners, this means an interest rate equal the federal short term rate plus three percentage points compounding daily,” observed Ronnie Hicks of Tax Defense Network (www.taxdefensenetwork.com).

The IRS said its rates for the calendar quarter beginning July 1, 2009, will be:

• 4% for overpayments (3% in the case of a corporation);

• 4% for underpayments;

• 6% for large corporate underpayments; and

• 1.5% for the portion of a corporate overpayment exceeding $10,000.

Hicks explained the implications of the tax rates. “With the current short term federal rate at 1%, a small business owner would be paying 4% compounded daily. In addition to interest rate charged on the tax balance, the IRS charges 5% per month up to a maximum of 25% for filing a return late and another .5-1% per month up to a maximum of 25% for failure to pay the tax when due. When the interest and penalties are added the additions to the tax debt can be staggering, and as the IRS intends, can prompt the taxpayer to seek other avenues of credit to pay off the tax debt.”

Hicks added that most tax payers would be much better off exploring alternative sources of funds as opposed to owing the Internal Revenue Service.

Sources: Internal Revenue Service, www.irs.gov; Tax Defense Network, www.taxdefensenetwork.com.


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