Delaying Payment of Old Tax Bills Is A Costly Mistake

In these unprecedented times, where the pandemic has reshaped our daily lives, there's yet another consequence that might catch you off guard—how the Internal Revenue Service (IRS) is altering its operations. Amidst the upheaval, the IRS's focus has shifted dramatically, causing a backlog of paper tax returns and an impact on taxpayers' obligations. If you find yourself in the midst of old tax bills or amendments, ignoring the implications of this shift could lead to costly mistakes.

The New Priority and Its Implications

The pandemic has prompted the IRS to prioritize generating stimulus checks, redirecting its attention away from paper tax returns. While this shift might not be a concern for those who don't owe money to the IRS or aren't looking to amend their tax returns, it carries significant implications for those awaiting refunds from past years' returns or those with outstanding tax liabilities.

Waiting for Amended Returns

If you fall into the category of individuals with amended tax returns, brace yourself for a waiting game. The IRS is currently facing a backlog, leaving individuals seeking responses from the agency in limbo. Despite the lack of response, resist the urge to submit new amendments, as doing so could complicate matters further. Patience is key in this situation.

The Pitfalls of Delayed Payments

For those with unpaid tax liabilities predating the crisis, the passage of time doesn't exempt you from accruing penalties and interest. While the IRS might take its time to address the issue, delay could prove detrimental. Your original tax liability continues to grow due to accumulating interest from the date it was due, and this applies even to amended returns reflecting a liability.

Unraveling the Interest and Penalties

The financial consequences of delayed payment can be substantial. Beyond the initial owed amount, you'll also encounter accruing interest and a failure-to-pay penalty of 0.5% per month (or partial month) that the debt remains unpaid, potentially escalating to 25% of the total liability. Additionally, a penalty for late filing can add another 5% to your monthly dues. Rather than letting interest snowball, consider the IRS's installment agreements, allowing you to pay in smaller increments over time.

Overcoming the Hurdles

While paper tax returns pile up, your financial obligations persist. To avoid further complications, adopt proactive measures when sending payment. If mailing a check, obtain proof of mailing to halt the accrual of interest and penalties. Alternatively, opt for electronic payments through direct payment channels. Remember, despite the paperwork backlog, the IRS will eventually address your submissions.

Seeking Clarity

Navigating the intricacies of old tax bills and the evolving landscape of IRS operations can be daunting. If you're grappling with questions about your tax liabilities or seeking insights into current IRS proceedings, don't hesitate to reach out to us. Our experienced team is here to provide guidance tailored to your situation.

Don't let the evolving IRS priorities catch you off guard. Address your old tax bills and obligations proactively to avoid the pitfalls of delayed payment. Our team is dedicated to helping you navigate these complexities and ensure you stay on top of your financial responsibilities.