December 4 – The Internal Revenue Service has bumped the interest rate of underpaid taxes from three to eight percent and for some people, that’s going to be quite a hit.
Steven Stitely of Saunders Tax and Accounting said, “It takes someone that may have been paying $100 over the course of a year, they could be up over $200 this year and the more you have in underpaid taxes, the greater that amount is going to be. So we have some clients that just because they aren’t being proactive and consulting someone like Saunders or whoever their tax professional is, could have thousands of dollars on top of the taxes they owe in penalties and just becomes a compounding problem.”
A person who has more than $1,000 in tax liability that is not being taken from payroll, quarterly estimated payments are required. The IRS will send a schedule when annual taxes are filed.
Attorney Clint Barkdoll said, “It’s going to pinch and this hits a lot of people. The fourth quarter estimated payment would be coming up January 15 or 16th, if that falls on a holiday. So the point of this new rule would be if you’re in that category, and you’re not making estimated payments, that underpayment is now going to be subject to an 8 percent fee for what you ultimately owe. I know a lot of taxpayers, I have a lot of clients that over the years have said to me, oh the quarterly payments are a headache. It’s just not worth it. I’ll pay the penalty when I file my taxes, knowing that there was going to be a 3 percent fee. Now at 8 percent, I would imagine people are going to say if you’ve not been making those payments, you want to make sure you’re making the payments and you’re making them for an adequate amount because 8 percent is a very big fee.”
Michele Jansen of NewsTalk 103.7FM noted, “It’s tremendous increase that could hit some people really hard and I just feel like small business owners are maybe a group that’s going to get hit and that’s the last group that could use having to put out more money for anything right now.”
Barkdoll agreed, “Remember, too, and I don’t know what the fees are for state and local but those quarterly payments also apply to your state taxes and your local taxes. So if you’re not making any of them, you may find yourself with a very substantial penalty essentially, for not making your quarterly estimated payments.”