April 15th is the deadline for most people to file their 1997 individual income tax
return and pay any tax owed. During processing, the return is checked for mathematical
accuracy, and the tax due is compared to all amounts paid. If there is any money owed, you
will be sent a bill which must be paid in full within 21 calendar days if the balance due
is less than $100,000, or 10 business days if the amount due is $100,000 or more. There
are several important things you should know about collection notices and bills. Interest
is charged on any unpaid tax from the due date of the return until the date of payment.
The interest rate is determined every three months and is the federal short-term rate plus
3 percent. Interest is compounded daily. In addition, if you file on time but don't pay
all amounts due 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, up to 25 percent. The one-half of one percent rate increases to
one percent if the tax remains unpaid and the IRS issues a notice of intent to levy.
If you owe tax and don't file on time, the penalty is even higher. The combined
late-filing and late-payment penalty is five percent of the tax owed for each month, or
part of a month, that your return is late, up to 25 percent. And if your return is over 60
days late, the minimum penalty is the smaller of $100 or 100 percent of the tax owed.
You must file your return and pay your tax promptly to avoid interest and penalty
charges. Often the funds necessary to pay your tax can be borrowed at a lower effective
rate than the combined IRS interest and penalty rate.
To ensure your payment on a bill for tax is credited properly, be sure to return the
tear-off stub on your bill and use our return envelope when provided. Please make your
check or money order payable to the Internal Revenue Service. Enter the primary social
security number or employer identification number, the tax year and form number and your
telephone number on your check or money order.
The penalties for filing late and paying late may be waived if you have reasonable
cause for being late. If you're billed for either penalty and feel you have reasonable
cause, send your explanation along with the bill to your service center, or call the IRS
at 1-800-829-1040 for assistance. Generally, interest charges may not be waived; they
continue to accrue until all assessed tax, penalties, and interest are paid in full.
If you believe there is an error on your notice or bill, write to the IRS office that
sent it to you within the time frame given. You should provide photocopies of any records
that may help correct the error. Also, you may call 1-800-829-1040 for assistance. If you
are correct, we will make the necessary adjustment to your account and send you a
For more information about IRS notices and bills, order Publication 594, Understanding
the Collection Process. More information about penalty and interest charges is
contained in Publication 17, Your Federal Income Tax. These
publications can be ordered by calling 1-800-829-3676.
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