Does anybody know how to figure penalties and interest the IRS way? I'm meeting with a client next week to prepare an amended return because of some income he forgot to report. Once we figure out what he owes, he wants me to figure out what the penalties and interest are so he can send a check and be done with it. He tried finding that info online, but said the IRS website is useless for this kind of figuring. I suggested he just send in the balance due we figure out and leave it to them to send him a bill for interest and penalties, but he wants to get square with them ASAP.
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I doubt that will happen. Their calculations are always a little different due to timing issues. Just tell him you can give him an estimate which he can add to his payment and then let IRS bill him the difference or refund the excess. Personally I'd refuse to stand by the accuracy of any estimate of P&I in a situation like this, but if the client insisted on something more than a rough guess I'd probbly charge them more for that work than for preparing the amended return. Clients can be downright silly about this stuff sometimes."The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith -
I don't figure P&I for late clients. I will estimate for them, but I was told by a Revenue Officer that if he pays the penalties with the return (voluntarily), then IRS will not waive the penalties. However, if he waits until he is billed the penalties and pays, it will not be voluntarily, and if the return is changed or amended in the future, he may get some of the penalty back. He could also ask for the penalties abated after receiving the bill if he has a good reason, or is a first time late filer/payer.Gary B., E.A.
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I make no claim as to the accuracy of the information and will not be held liable for any damages caused by using such information.Comment
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Historical numbers
Well, if you're a glutton for punishment and the client does not mind some serious billable hours, this link might help somewhat:
Like JohnH, I would never calculate any P&I. Chances are pretty good my numbers would not match theirs.
FEComment
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Your tax prep software might be able to calculate the P&I, but even if it does, the amount is probably not going to match the IRS's.
I tell clients approximately what the P&I should be and that when the IRS bill arrives to pay it if it's close to that. Most are happy with that approach.Roland Slugg
"I do what I can."Comment
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My software doesn't calculate interest or penalties because it assumes the TP paid the balance due even if he didn't, although it does calculate a penalty for late payment in the current year if it's after the April deadline. It's pretty clear to me after looking at all the answers here that a person should let the IRS calculate their own penalties and interest. I already told TP it's quite involved (because government agencies tend to make things way more complicated than they need to) and that what IRS figures and what I would figure probably would't be exactly the same anyway because of the timing.Comment
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That should settle it.
If not, then just tell him "no"."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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If you call the Pro hotline they will figure it for you and tell you how long the amount is good for. The penalties can usually be abated along with the interest attached to them. The interest attached to a late filed/paid return, itself, usually will not be abated. Your client will think you are a wizard because they don't know that penalties can be waived.Believe nothing you have not personally researched and verified.Comment
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