Department of the Treasury
Internal Revenue Service
www.irs.gov
Notice 433 (Rev. 7-2006)
Catalog Number 26242I
Interest and Penalty Information
Period Underpayment
Interest Rate and
Estimated Tax
Penalty Rate
Overpayment
Interest Rate
10/1/94-3/31/95.......................
4/1/95-6/30/95.........................
7/1/95-3/31/96.........................
4/1/96-6/30/96.........................
7/1/96-3/31/98.........................
4/1/98-12/31/98.......................
1/1/99-3/31/99.........................
4/1/99-3/31/00.........................
4/1/00-3/31/01.........................
4/1/01-6/30/01.........................
7/1/01-12/31/01.......................
1/1/02-12/31/02.......................
1/1/03-9/30/03.........................
10/1/03-3/31/04.......................
4/1/04-6/30/04.........................
7/1/04-9/30/04.........................
10/1/04-3/31/05.......................
4/1/05-9/30/05.........................
10/1/2005-6/30/2006...............
Beginning July 1, 2006
9%
10%
9%
8%
9%
8%
7%
8%
9%
8%
7%
6%
5%
4%
5%
4%
5%
6%
7%
8%
8%
9%
8%
7%
8%
7%
7%
8%
9%
8%
7%
6%
5%
4%
5%
4%
5%
6%
7%
8%
The interest rate on underpayment and overpayment of taxes and
the penalty for underpayment of estimated tax are as follows:
The law requires us to determine these interest rates quarterly.
We compound interest daily except on late or underpaid estimated
taxes for individuals or corporations.
We charge 120% of the underpayment interest rate if: (1) the
return was due before January 1, 1990, excluding extensions; (2) the
underpayment was over $1,000; and (3) the underpayment was from
a tax-motivated transaction.
For (C) Corporations with underpayments over $100,000, we
charge the underpayment interest rate plus 2%.
We'll continue to charge interest until you pay the amount you owe
in full.
The penalty for late filing is 4 and 1/2% a month when the 1/2% a
month penalty for late payment applies at the same time. The late
filing penalty applies on the amount showing due on the return for any
month (or part of a month) the return is filed after the return due date
(including extensions) but cannot exceed 5 months. If you don't file
your tax return within 60 days of the due date, the minimum penalty is
$100 or 100% of the tax due on your return, whichever is less.
The penalty for late payment is 1/2% (1/4% for months covered by
an installment agreement) of the tax due for each month or part of a
month your payment is late. The penalty increases to 1% per month if
we send a notice of intent to levy, and you don't pay the tax due within
10 days from the date of the notice. The late filing penalty cannot be
applied at monthly rates totaling more than 25%.
The deposit penalty for employment, excise, or railroad retirement
tax varies from 2% to 15% depending on how late the deposit is.
IRS
(over)
You may appeal the changes shown on the enclosed notice within
60 days from your notice date. Send your explanation with a copy of
the notice to the address shown on your notice.
We'll notify you if we don't accept your explanation. If we accept it,
we'll reduce any tax increase due to the change. We'll refund any tax
you overpaid if you owe no other tax or have no other debts the law
requires us to collect.
We'll continue to charge interest if you don't pay the balance you
owe by the date requested in this enclosed notice.
We charge interest on penalties for late filing, late paying, over or
understating valuations, and substantially understating the tax you
owe. Also, we charge interest on fraud and accuracy-related
penalties from the later of the return due date or extended due date.
The law allows us to remove or reduce a penalty based on
reasonable cause. To request a penalty reduction, send a statement
to us fully explaining the facts. You or your representative with your
power of attorney must sign your statement under penalty of perjury.
In some cases, we may request that you pay the tax in full before we
remove or reduce the late payment penalty. The law does not allow
us to remove or reduce interest based on reasonable cause.
We'll remove the penalty (but not the interest) if: (1) you wrote to
us and asked for advice on a specific issue; (2) you gave us complete
and accurate information; (3) we wrote back to you and told you what
to do or explained what not to do; (4) you followed our written advice
in the way we told you to; and (5) you received a penalty for the
action we advised you to take.
If you meet this criteria, complete Form 843, Claim for Refund and
Request for Abatement, and ask us to remove the penalty.
Attach to your Form 843: (1) a copy of your original request for
advice; (2) a copy of the written advice we gave you; and (3) the
notice (if any) showing the penalty we charged.
Send Form 843 to the IRS Service Center where you filed your
return for the year you relied on erroneous advice from us.
The law requires us to remove interest up to the date we request
you to repay the erroneous refund when: (1) you did not cause the
erroneous refund in any way; and (2) the refund doesn't exceed
$50,000.
IRS may remove or reduce interest on other erroneous refunds or
on errors due to an IRS ministerial act, based on the facts and
circumstances of each case.
If we reduce interest that you previously reported as a deduction
on your tax return, you must report this reduction of interest as
income on your tax return for the year we reduce it.
The penalty for filing an exempt organization return late is $20 a day
for each day your return is late, if your gross annual receipts are
equal to or less than $1 million. The penalty may not be more than
$10,000 or 5% of your gross annual receipts, whichever is less.
$100 a day for each day your return is late, if your gross annual
receipts exceed $1 million. The penalty may not be more than
$50,000. For all other forms the penalty is $10 a day for each day
your return is late filed. The penalty may not be more than $5,000.
Interest on Certain Penalties
Removal of Penalty and Interest
Reasonable Cause
Erroneous Written Advice from IRS
Interest on Erroneous Refunds
Notice 433 (Rev. 7-2006)
Appeal Rights—Arithmetic Error
Catalog Number 26242I
