Color of Money

The one thing you shouldn’t do is put off filing because you can’t pay your tax debt. Don’t add to your financial burden by being hit with a failure-to-file penalty, which is usually 5% of the tax owed for each month or part of a month that your return is late, up to a maximum of 25%. File and pay what you can, or ask for a payment plan, something you can easily do at irs.gov.

And don’t be so scared of the IRS that you resort to getting help — typically at a steep price — from a company promising to reduce your tax debt. Don’t fall for the tax relief hype. Putting your faith in a debt-settlement company is likely to leave you deeper in debt and still stuck with your tax bill. If you don’t feel confident about applying for an installment agreement online, at least find a reputable tax professional.

Maybe you don’t owe the IRS, but the agency owes you.

If you’re waiting on a refund, you may be due a bonus. The IRS is paying interest on 2019 refunds issued after April 15, and it’s better than what you’d get at a bank. The interest rate for the second quarter, ending on June 30, is 5%, compounded daily. After this date, the interest rate for the third quarter, ending

Sept. 30, drops to 3%. Interest payments may be received separately from the refund.

July 15 is also a deadline for a different group of taxpayers, those who didn’t file a 2016 return but are owed a refund.

By law, taxpayers have just three years to claim a refund. That means July 15 is the last day people may recover money the IRS owes them for the 2016 tax year.

The IRS says it owes about $1.5 billion in unclaimed federal income tax refunds to an estimated 1.4 million taxpayers. The median potential refund is $861. Many low-income workers may be eligible for the Earned Income Tax Credit, which for 2016 was worth as much as $6,269. And don’t worry about any penalties. There is no penalty for filing late when the IRS owes you a refund.

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@ washpost.com. Follow her on Twitter (@ SingletaryM) or Facebook (www.facebook. com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.