In case you ever find yourself owing the IRS $12,363, here is what you need to know about payment plans and interest rates.
IRS-PUB, 2005, IRS Publication No. 910, An Installment Plan to Pay Your Taxes
If you are not able to pay all your federal taxes by the due date, a monthly payment plan may be the answer. The process isn’t automatic and there may be alternatives, but if you are eligible, this could be the solution that makes paying taxes easier.
Apply for a payment plan by completing Form 9465, Installment Agreement Request. This form also has details about eligibility requirements.
Generally, you may have up to 60 months to pay, but paying the full amount as soon as possible will save you money in penalties and interest. The late payment penalty is usually 0.5 percent a month, every month, up to 25 percent of the tax owed. Interest rates vary because they are set quarterly. You can check the current interest rate by going to www.irs.gov, keyword interest rate. Interest and penalties are figured on the declining monthly balance throughout the life of the payment plan. There is also a $43 set-up fee for an installment agreement, which is taken from your first payment under the plan. Do not send the $43 with Form 9465.
The current interest rate is 8%.