Hello, I am in situation where I need to calculate the penalties levied by IRS for undisclosed saving accounts. By "penatly" I am taking about back taxes owed, interest, etc etc. If I want to do this myself what is the easiest, simplest, and cost effective way without getting a CPA involved. I am open to using software also. I am trying to get a rought idea about my cost liability?

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Originally Posted by rdhing

If I want to do this myself what is the easiest, simplest, and cost effective way without getting a CPA involved.

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Hello r:

The only reason to get a CPA involved is because he can SAVE you more money than he costs... Otherwise, you're just contributing to his retirement plan. So, in answer to your question, I don't believe there IS a simple, easy, cost effective way to deal with your problem WITHOUT getting a CPA involved.

excon

No need for a CPA. The easiest way is to file an amended tax return (Form 1040-X) for the year(s) in which you failed to report your interest. On that form you calculate the taxes due, and don't bother with calculating penalties or interest owed for late payment. Send the form in with your payment for the additional taxes you owe. Then the IRS will come back to you with an accounting of the penalty that you owe for the late payment.

Alternatively, programs such as TurboTax can calculate this as well. The problem is that if you did not use TurboTax originally you would have to enter all the data from your return, which might take anywhere from an hour or two to several hours to get it right.

If all you need is an estimate: the IRS charges 1/2% interest per month (or partial month) that your payment is late.

The interest rate changes every 3 months, based on prevailing federal interest rates from. Its compounded daily. But for an approximation, you can use the formula suggested and let the IRS do the computation and either refund or bill you for minor discrepancies.