Mar 11, 2009

Does the IRS want you to take a loan from them?

IRS Interest Rates at an all time low- 4%

Effective 4/1/2009, the IRS will charge the lowest interest rate that it has ever charged since the inception of the 1954 tax code: 4%. It has only been this low on one other occasion: the 10/1/03 through 3/31/04. The previous quarter interest rate was 5%.

Is this the kindler, gentler IRS? Is this another government bailout program by charging lower interest rates on tax debt to stimulate the economy?

Hardly, the IRS is just following the rules for determining the interest rates. The rate is the federal short term rate plus three % and is compounded daily.

That means when interest rates are low, even the IRS cannot charge you a larger amount. However, the normal failure to pay penalty rate is still one-half percent per month on taxpayers not in an agreement with the IRS (then it is one-quarter of a percent) and not in IRS Collection Enforcement (then it is 1% per month while in enforcement).

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