What interest will I pay if I use a payment plan to pay my taxes due?

Forum|Forum|1 year ago
March 21, 2025
2 replies
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I owe 958 federally and am owed 215 by the state - what penalties and interest rates will I pay if I pay the amount due with a payment plan?

Mike9241

Level 15

penalty 1/2% a month until paid (file timely because filing late and owing is another 4.5% per month for up to 5 months.

interest rates will vary.

The IRS interest rate is determined by the federal short-term rate plus 3%. Since the current federal short-term annual interest rate is 4.71%, the interest rate charged on late tax payments was 7.71% as of March 2024.

Mike9241

Opus 17

Level 15

As long as you file on time, and pay as much as you can when you file, the interest and penalties on the unpaid balance is a penalty of 0.5% per month, plus interest currently at 7.7% APR (roughly 0.6% per month). If you don't file on time, the penalty jumps to 5% per month.

If you can pay in full in less than 6 months, you can request a short term payment plan for free, but the only benefit is you don't get a bill, the interest and penalties still accrue at the normal rate.

If it will take longer than 6 months to pay, there is a non-refundable application fee for a long-term payment plan, and the interest and penalties are reduced by about half.