Avoiding IRS Interest

It is if and when you are late in filing your tax returns, and if you don't file your tax returns that you will be liable to pay IRS penalties to the IRS. However if you tend to procrastinate in making payments towards these IRS penalties, you only end up having to pay the brunt of IRS interest too. However with some thought and planning, it is possible to avoid paying IRS interest.

If you cannot pay your IRS dues because of a deficit of funds, then you could apply for a fresh credit card with an interest rate that is less than the IRS interest. You could then pay your IRS dues using the credit facility of the credit card, and thus avoid having the need to pay IRS interest towards IRS dues.

You could also consider taking a loan from a source charging lower interest rates than the IRS interest. This money could be used to pay the IRS taxes on time, and thus help you avoid IRS interest. However don't forget to pay off your loan or credit card dues on time, lest you land up in dues because of this.

You can use an American Express, Discover Card or Master Card to pay your IRS taxes on time. You thus avoid IRS interest; but may have to pay a 'convenience' fee that IRS charges on payments made through credit cards. You could always write a letter to the IRS, requesting them to permit you to pay your IRS taxes in installments.

Make sure you place a repayment schedule suitable to you, and hope that the IRS approves your proposal. If the proposal is approved, the IRS may charge you a minimal fee but you will be liable in paying IRS penalties and interest on the balance due. However there are some situations where all this is not possible on your part because of insufficient resources on your part.

In such cases, it is not advisable to procrastinate on paying your tax returns. It is better to adopt an upfront attitude wherein you lay down your cards before the IRS and ask them for a compromise to avoid having to pay additional IRS interest on your IRS dues. However, it is always better to consult your CPA to find out on the best plan of action to follow to come out of your situation and avoid IRS interest.

Useful Tax Resources