April 15th is the deadline for most people to file their 1997 individual income tax return and pay any tax owed. During processing, the return is checked for mathematical accuracy, and the tax due is compared to all amounts paid. There are several important things you should know about collection notices and bills. Interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined every three months and is the federal short-term rate plus 3 percent.
Interest is compounded daily.
In addition, if you file on time but don't pay all amounts due on time, you'll generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid after the due date, up to 25 percent. The one-half of one percent rate increases to one percent if the tax remains unpaid and the IRS issues a notice of intent to levy. If you owe tax and don't file on time, the penalty is even higher. You must file your return and pay your tax promptly to avoid interest and penalty charges. Often the funds necessary to pay your tax can be borrowed at a lower effective rate than the combined IRS interest and penalty rate.