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What is the percentage of interest the IRS was charging on assessment (amount of unpaid...

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linnie4352 | Student, Undergraduate | Salutatorian

Posted April 11, 2011 at 2:40 AM via web

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What is the percentage of interest the IRS was charging on assessment (amount of unpaid tax liability) during March 2010?

A. 6%
B. 5%
C. 7%
D. 4%

Tagged with economics, income tax, math

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justaguide | College Teacher | (Level 2) Distinguished Educator

Posted April 11, 2011 at 4:24 AM (Answer #1)

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If a person does not pay taxes before the due date, an interest is charged on the amount that has to be paid till the date it is actually paid.

The rate of interest is not a constant one and is calculated again after a period of every three months. It is equal to the 3% more than the federal short term rate prevailing then.

For March 2010, the rate is 4%.

This interest is compounded on a daily basis which would make the actual interest payment very high effectively. Also, there could be various other charges levied for not paying the taxes in a prompt manner. The correct answer is 4% or option D.

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