Delaying Payment of Old Tax Bills Is A Big Mistake
You know that long list of ways that the coronavirus has affected our lives? Well, here’s another one. The Internal Revenue Service has completely flipped a switch on its priorities, and it is not even looking at paper tax returns that are being sent to it. The idea of all those envelopes piling up somewhere is a bit mind-boggling, but it’s apparently what’s happening as the Treasury Department focuses on generating the stimulus checks that American taxpayers need to get through the crisis.
If you don’t owe the IRS money and you’re not looking to amend a previously filed tax return, this shift won’t mean much to you. You can rest easy knowing that the tax return and payments that would have been due in April are now not due until July 15th. But if you were hoping to get a refund from a previous year’s return via a return you amended (or need to amend), or if you owe the IRS money, you need to pay attention.
For the first of these two categories – the folks with amended returns – what you need to know is that you’re not likely to see any kind of response for quite a while. There’s no way to find out what the status is and the agency is pointedly advising people not to interpret the lack of response as a need to send in a new one. Doing so would just confuse things more. You need to sit tight.
If, however, you owe the IRS money from before the crisis occurred, there are no breaks on the penalties and interest that are stacking up. It may take the agency a while to get around to figuring it out, but if you decide to sit and wait ‘til you hear from them, you’re going to be in for a big shock. Your liability is not only still there, it’s adding on interest from the time that it was due. This is true on amended returns that reflect a liability as well.
How much could the interest and penalty add up to?
In a word – it could add up to a lot. Not only do you owe the original amount, you are also subject to accruing interest and a failure-to-pay penalty of 0.5% of your original liability for each month (or partial month) that it hasn’t been paid. That can rack up to 25% of the liability. There’s also a penalty if you failed to file on time, and that can add up to another 5% of the amount that you owe each month. Even if you can’t afford to pay your entire liability all at once, you’re much better off paying small parts over time than waiting and having all of that interest added to your debt. You can contact the IRS online to arrange for one of their installment agreements.
Remember that mountain of returns piling up somewhere? Keep that in mind when you’re ready to send the IRS your money and If you are including a check, be sure to get a proof of mailing in case you have to prove to the IRS that the interest and penalties stopped accruing with your filing and payment. Of course, you can opt for paying electronically via direct payment. Don’t worry about the fact that the paperwork is sitting in that big pile. The agency will eventually get around to going through it.
If you have any questions about your old tax bills or current IRS operations, please contact this office.
Want tax & accounting tips and insights?
Sign up for our newsletter.
Comprehensive Business Accounting Services
For business in Chicago and the surrounding areas, we provide an integrated set of services that work together to help you grow your business.
-
Bookkeeping and Financial Reporting
-
Reliable, organized books are the backbone of good decision-making. We maintain accurate records, prepare meaningful financial statements, and help you read the story your numbers are telling.
-
Business Tax Preparation & Tax Planning
-
As a CPA for small businesses, we prepare tax returns for sole proprietorships, partnerships, S corporations, and C corporations with accuracy. We also help you develop a tax strategy to keep more of what you earn.
-
Payroll
-
We help you pay your team accurately and on time while staying current with federal, Illinois, and local payroll tax obligations, filings, and deadlines, so payroll is one less thing to worry about.
-
Business Consulting
-
Good accounting shows where your business stands; a good consultant helps you decide where to take it next. From entity selection to expansion planning, we're a steady financial sounding board for the decisions that shape your company's future.
Why Chicago Businesses Choose Serenity
Because we operate as an integrated tax and wealth practice, our business accounting services align with the broader financial decisions that matter to you and your company. When your business tax strategy connects to your personal financial landscape, you will be able to make decisions with fewer blind spots.
Clients near Chicago and across the country turn to Serenity Tax & Accounting for support that is comprehensive, coordinated, and proactive. We believe accounting should bring you clarity. We pride ourselves on calm communication, plain-language explanations, and responsive service throughout the year, not just during tax season.
When you work with our firm, you're building a relationship with a team that understands your business, anticipates what's coming, and helps you move forward with confidence.
Frequently Asked Questions
-
Software is a tool, not a substitute for judgment. A CPA reviews your books, catches errors, prepares accurate statements, and finds tax savings the software won't flag. We work alongside the system you already use.
-
Ideally, well before tax season. The biggest savings come from year-round planning, not filing-time scrambling. We work with you throughout the year, so there are no surprises in the spring.
-
As an integrated division of Serenity Wealth Management, your accounting, tax strategy, and broader financial goals work together, keeping your business and personal decisions aligned with fewer blind spots.
-
We support Chicago-area sole proprietorships, partnerships, LLCs, S corporations, and C corporations, tailoring our bookkeeping, payroll, and tax services to the size and complexity of your business.