Calculate Interest and Penalties

Today TaxMama hears from Joe in the TaxQuips Forum with this question. “How do you calculate the penalty and interest when amending a tax return? I was told by a local chain that does taxes, that only the IRS can calculate these.
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Hi Joe,

That’s utter nonsense.

You can calculate your own penalties and interest.
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You just need to know where to find the rates.

Your underpayment penalty is .5% (one half percent) per month of the balance due – up to 25% (that’s 50 months).
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The interest rate is right here, through 2008:
https://www.irs.gov/individuals/article/0,,id=200320,00.html

For 2009, here it is.
https://www.irs.gov/newsroom/article/0,,id=201115,00.html

What you can do is, come up with a reasonable estimate of penalties and interest and pay a few extra dollars. Then IRS will send money back to you.

When you amend, simply include a sensible explanation of why this income was omitted. This shouldn’t be difficult.

Some things are not a mystery. People should not make them needlessly difficult.

And remember, you can find answers to all kinds of questions about computing penalties and interest and other tax issues, free. Where? Where else? At www.TaxMama.com .

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