never mind I am trying to determine the accurate method to calculate interest for taxes. I am using the CUMIPMT function in excel. Does anyone out there have any experience in dealing with this issue? BTW, thanks to those who responded earlier! I think that I am making it more difficult than it needs to be. I was researching info on the IRS site and I came across this: The Internal Revenue Service Has Made Some Progress, but Significant Improvements Are Still Needed to Reduce Errors in Manual Interest Calculations Basically, it says that there were IRS employees who were entering a code into the computer that stopped the computer program from being able to calculate the interest. Then, the IRS employee would calculate the interest manually. No insult to IRS employees, but if they can do this manually, then it can't be TOO difficult! Anyone? I just realized that mycroft was 100% correct. They undercharged interest. Better leave well enough alone!
never mind Hey Sirrowan, That's just the point. It IS difficult. Hand calculating interest on an outstanding balance is hard enough (for the laymen) it's practically impossible to do so on a "revolving" balance that (stair steps) increases each month. To expect a poorly paid, trained, motivated IRS employee to do it right, by hand, is preposterous. I'm a Financial Planner with years of college and I don't even try that. LOL The interest for outstanding Federal Tax Liability is: 5% per month for the first 5 months of each year, and then stops for the balance of the year. Same thing the following year, and so on. 25% per year total. So you're right, don't let federal taxes fall behind.
Re: Re: never mind I'm sorry. I called you by the wrong name. I'm horrible with names. I had something like 124 people in my high school graduating class and when I see one of them I usually can't remember their names! My 15 year reunion is coming up and I've decided to go. Thank God for name tags!
Re: Re: never mind No problem sirrowan ! I just did that because mycroft and I joined at roughly the same time I think. There was some initial "friction" between mycroft and others at the time and, as I started joining other boards, I was mistaken for mycroft and the defenses were up a little. That's generally been straightened out and it looks like mycroft (to his/her credit) and, hopefully, myself have made adjustments to be more smoothly "assimilated" into this community. Anyways, I do want to make a point that the low interest rate I calculated earlier didn't necessarily mean they were undercharging but served only to show a big difference betweeen simple daily compounding of the initial amount and what they where actually doing which could be quite complex based on my take at the IRS website. If they were adding amounts in later on and charging interest onto penalties for failure to pay then the shorter age of those later amounts and how interest on them accrues would look like a lower rate if one mistakenly assumed they had charged interest on a fixed amount over the whole time period. Well, there, I guess all the gobbledy-gook I just spewed merely reinforces the fact that it is a can of worms !
