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romel24
New Member

paying owed federal taxes. Is IRS payment plan a good option?

We owe federal taxes for this year, I already filed and paid a portion of the owed amount but there is a remaining balance.  I am trying to decide if paying using the 120 days plan is a good option.
Is there a formula on how the IRS calculates interest?  I know the interest is around 3% changing every quarter, compounded daily. I have been trying to figure what is the formula to calculate how much interest would I end up paying at the end of the 120 days plan.  Or would it be better to use a credit card balance transfer offer.  

3 Replies
DavidD66
Expert Alumni

paying owed federal taxes. Is IRS payment plan a good option?

If you can pay the balance within 120 days, arrange to do so with the IRS, and you can avoid paying the installment plan set up fee.  If you can't pay within 120 days, set up an installment plan with the IRS.  

 

There are different types of penalties and interest that can be charged on outstanding balances.  For information on these go to the following IRS web page:  Common Penalties for Individuals

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romel24
New Member

paying owed federal taxes. Is IRS payment plan a good option?

Thanks for your reply. We have paid part of the total amount and filed already. So we shouldn't incur in penalties. But I am trying to decide if the 120  days payment plan is better than CC .  What I'm looking for is a formula to calculate the interest on the remaining balance.  I haven't been able to find it in IRS site. 

fanfare
Level 15

paying owed federal taxes. Is IRS payment plan a good option?

you can be sure IRS interest rate is much lower than credit card interest.

The difference is, you must pay off the IRS balance in a fixed time period and you can't be late on payments.

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